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October 2013 Archive for Farmland Forecast

RSS By: Marc Schober, AgWeb.com

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

Crop Progress: Despite Delays in Harvest, Corn Conditions Improving

Oct 28, 2013

Wet weather over the past week slowed an already lagging harvest. Corn conditions continue to improve modestly despite the weather. Soybean harvest is almost finished which means corn will soon have the full attention of analysts, farmers, and combines in the coming weeks.


As of October 27, 2013, 13% of the corn crop was in poor or very poor condition, a decrease of 1% from last week. Corn in good or excellent condition was 62%, compared to 60% a week ago. Corn that has been harvested was at 59%, behind the five year average of 62%. 

A total of 77% of the soybean crop has been harvested, in line with the five year average. 

Winter wheat planted as of October 27, 2013 was 86%, slightly above the five year average of 85%. A total of 65% of the winter wheat crop has emerged, 1% above the five year average. Winter wheat in poor or very poor condition was unchanged from last week at 4%. Winter wheat in good or excellent condition decreased by 4% to 61%.

December futures for corn ended the week at $4.30 per bushel, a 3.2% decrease from last week. November soybeans ended the week at $12.71, a 2.5% decrease from last week. December wheat ended the week at $6.81, a 2.6% decrease from last week. Year to year corn prices are down 43.1%, soybeans are down 17.8%, and wheat is down 21.2%. 

For daily articles on farmland and agriculture, visit www.farmlandforecast.com  
 

Crop Progress: Improved Weather Helped Crop Conditions

Oct 21, 2013

Crop conditions were enhanced over the past three week hiatus of the Crop Progress Report during the recent Federal Government shutdown. Harvest is picking up steam, but still trailing historical averages.

As of October 20, 2013, 14% of the corn crop was in poor or very poor condition, a decrease of 2% from three weeks prior. Corn in good or excellent condition was 60%, compared to 55% from three weeks ago. Corn that has been harvested was at 39%, behind the five year average of 53%.

Soybean condition was 14% in poor or very poor condition, a 1% decrease from three weeks ago. Soybeans in good or excellent condition was 57%, an increase of 4% from three weeks prior. A total of 63% of the soybean crop has been harvested, 6% behind the five year average.

Winter wheat planted as of October 20, 2013 was 79%, in line with the five year average. 53% of the winter wheat crop has emerged, 1% behind the five year average.

 

December futures for corn ended the week at $4.44 per bushel, a 1.6% increase from last week. November soybeans ended the week at $13.03, a 2.4% increase from last week, and December wheat ended the week at $6.99, a 1.0% increase from last week. Year to year corn prices are down 41.7%, soybeans are down 15.7%, and wheat is down 20.4%.

For daily articles on farmland and agriculture, visit
www.farmlandforecast.com

Rural Economy Improves Over the Past Month

Oct 21, 2013

Despite the government shutdown, plunging grain prices, and negative sentiment of a farm bill actually getting passed, the rural economy strengthened this past month. The Rural Mainstreet Index (RMI) increased over the past month for the first time since June and continues to remain above growth neutral. The farmland price index has been above growth neutral for an astonishing 45 months, although it declined slightly in September.

Dual Farmland Price and Rural Mainstreet Index October 2013

The Rural Mainstreet Index (RMI), ranging between 0 and 100 with 50.0 representing growth neutral, increased to 54.3 in October, from 52.4 in last month’s survey. Ernie Goss, economist at Creighton University, commented, "While the overall index is up for the month, I still expect growth in the Rural Mainstreet Economy to be slower in the months ahead. Agriculture commodity prices for select products have declined significantly and are approaching breakeven for some producers."

The farmland price index decreased for the 10th time in the last 11 months, but remains above growth neutral, 50.9. Goss noted, "Weaker agriculture commodity prices and poor weather conditions in some parts of the region lowered the farmland price index. Clearly, farmland price growth and cash rent expansions in the months ahead will not be as healthy as has been experienced in the past couple of years."

Bankers were asked this month how much they expect cash rents to increase over the next year. On average, bankers believe rents will increase 2.5%, a far cry from six months ago when bankers estimated rents would increase 9.3%.

For the third month in a row, farm equipment sales were below growth neutral at 44.6. "Sales are declining and inventories are growing as farmers pull back on their purchases of big ticket items," said Goss.
 
The loan-volume index decreased to a still healthy 64.7, from September's 73.5. The checking-deposit index dropped to below growth neutral, 48.3, from 56.3 last month.

 Chart of RMI October 2013

Survey
 
This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

For daily articles on farmland and agriculture, visit www.farmlandforecast.com

Surprisingly High Corn Yields

Oct 01, 2013

2013 has been a very unusual year thus far. Coming off of the worst drought in 55 years, the Corn Belt experienced extremely wet planting conditions which led to 8.213 million acres of U.S. farmland to be unplanted, according to the Farm Service Agency update on September 17. Most recently, corn is abnormally being harvested before soybeans due to the lag in soybean maturity from the late planting. Many farmers are also reporting higher than expected corn yields thus far on the outer Corn Belt regions that have begun harvest.

China recently announced that Chinese owned Xinjiang Production and Construction Corp (XPCC) agreed with Ukrainian owned KSG Agro to acquire 7.5 million acres of Ukrainian farmland over the next 50 years for $2.3 billion. The land, located in eastern Dnipropetrovsk, will be used to raise crops and pigs to sell at preferential prices to Chinese state-owned companies. XPCC will start farming 250,000 acres at first.

Grain Prices

December corn prices decreased by 8.7% throughout September to close at $4.41 per bushel. Corn prices rallied in early September on very hot and dry weather conditions alongside frost risk, but the weather improved and prices retreated. In the September WASDE report, the USDA increased the 2013 average yield per acre by 0.9 bushels per acre to 155.3 bushels per acre, pushing record production to 13.8 billion bushels. The USDA also reported a very high amount of corn stocks on hand as of September 1st with 824 million bushels in all positions, although 165 million bushels lower than one year ago.

December soybean prices decreased by 5.5% this month to close at $12.82 per bushel. Improving weather conditions throughout September and speculative selling led to lower prices this month, although the USDA reported a 1.4 bushel per acre reduction in average U.S. yields due to poor growing conditions. In addition, the USDA estimated only 141 million bushels of soybeans were in current stocks as of September 1st, which is 17% lower year-over-year.

The December wheat contract increased by 5.4% this month, closing at $6.78 per bushel. The USDA did not make any changes to U.S. wheat production this month, although ending stocks were increased by 10 million bushels due to increased export competition from Canada's bumper crop. Wheat stocks in all positions were estimated at 1.85 billion bushels, down 12% from 2012. Strong export demand supported wheat prices throughout September as well as reports of frost in Argentina and slow winter wheat planting in Ukraine and Russia.

Harvest Update

As of September 29, 2013, 63% of the U.S. corn crop was mature compared to the five-year historical average of 70%. Corn harvest has already fallen behind with only 12% of the corn crop harvested thus far compared to the historical average of 23%. Soybean harvest is also behind schedule with only 11% harvested thus far compared to the historical average of 20% by the end of September.

Farmland Values

The Creighton University farmland price index contracted again and has decreased nine of the last ten months, but remains above growth neutral at 54.0 for the 44th month in a row. Professor Ernie Goss noted, "Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices are slowing growth in farmland prices. The Federal Reserve’s decision to make no changes to their expansionary monetary policy is definitely bullish for agriculture. Most economists, including me, expected the Fed to begin tapering QE3. Thus, the Fed’s lack of action in September will be supportive of agriculture commodity prices, farm income and farmland prices in the weeks and months ahead." Bankers also reported, on average, cash rents increased 9.9% from last year.

Farmland values have been steady through the summer months despite the reduction in commodity prices. Moving forward into the typical selling season post harvest, we will closely monitor sale prices due to the increase in sales across the entire Corn Belt. Even at current future commodity prices, farmland values are still fairly assessed.

Outlook

Harvest is an exciting time of year for farmers because they can finally start to see their hard earned yields come in. Our network of farmers have been pointing out that corn yields thus far have been higher than previously anticipated with favorable moisture levels. We will continue to monitor corn harvest throughout October and are anxious for early soybean yield data as well.

For daily articles on farmland and agriculture, visit www.farmlandforecast.com

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