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March 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.

Corn Stocks Well Above Analyst Expectations

Mar 28, 2013

 

Corn, soybean, and wheat prices all substantially decreased due to above average estimated quarterly stocks in today's USDA reports. The biggest surprise came with corn stocks of 5.40 billion bushels, 400 million bushels above analyst's average estimate. The Prospective Plantings Report held no surprises but continues to forecast a record corn crop.

Prospective Plantings Report

March 2013 Prospective Plantings Report Corn Soybeans Wheat USDA

 

 

Corn planted acres for 2013 were estimated at 97.3 million acres, the largest acreage since 1936 and up slightly from 2012. Low inventories of corn resulting in record high prices have incentivized farmers to plant more corn relative to soybeans. North Dakota, not known for their corn growing capability, is estimated to plant 14% more corn compared to last year.

Soybean planted acres were estimated at 77.1 million, a 1% decrease from last year's 77.2 million acres. Soybean acreage was increased the most compared to last year in Illinois and North Dakota, whereas planted acres were decreased the most in Nebraska and Minnesota.

All wheat planted acres were estimated at 56.4 million acres, an increase of 1% from 2012. Winter wheat planted acres were estimated at 42.0 million, a 2% increase year over year. Large wheat supplies are providing little incentive for farmers to plant wheat.

Quarterly Stocks

 

March 2013 Quarterly Grain Stocks Report Corn Soybean Wheat

 

 

USDA reported 5.40 billion bushels of corn on hand as of March 1, 2013, a 10% decrease from the same time last year. Of the total stocks, 2.67 billion bushels were stored on farms, down 16% from 2012. Off-farm stocks were at 2.73 billion bushels, down 4% from a year earlier. December 2012 to February 2013 disappearance was 2.63 billion bushels, compared to 3.62 billion bushels a year ago.

Soybean stocks decreased 27% compared to last year with 999 million bushels as of March 1, 2013. Stocks stored on farms totaled 457 million bushels, an 18% decrease from last year. Off-farm stocks decreased to 543 million bushels, down 34% from last March. December 2012 to February 2013 disappearance was 967 million bushels, a decrease of 3% from last year.

Wheat stocks increased by 3% from last year with 1.23 billion bushels being reported on March 1, 2013. On-farm stocks were estimated at 237 million bushels, a 9% increase from last March. Off-farm stocks were up 2% from last year, coming in at 997 million bushels. The December 2012 to February 2013 disappearance was 436 million bushels, down 6% from March of 2012.

Outlook

All three grain prices (corn, soybeans, and wheat) have plunged $0.40 to $0.50 on the front month. We now will turn our attention to April and the beginning of planting season. With excess moisture, will farmers be able to get into the fields to plant on time? Is 160+ bushels an acre average corn yield realistic? What will weather bring this year after 2012's historic drought? These and many other questions remain to be answered.

 

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

 

 

 

As Farmer Incomes Rise, Rents Follow

Mar 25, 2013

Farmer income is expected to reach a record high in 2013 and bankers indicated in March that cash rents will increase by over nine percent in 2013, according to the Rural Mainstreet Survey. Farmland values continue to appreciate although respondents are concerned about recent strong growth.

The RMI decreased slightly to 56.9 from 58.2 in January. "Very healthy farm income continues to boost the Rural Mainstreet economy though growth has slowed a bit," commented Creighton University economist Ernie Goss.

Rural Mainstreet Index March 2013

Agriculture

The farmland price index increased to 67.2 from 67.0 in February. This marks the 38th consecutive month the index has been above growth neutral. The farm equipment sales index fell to 60.5 vs. 65.8 last month.

According to Goss, "Current readings are consistent with farmland price growth between 12 and 16 percent. The Federal Reserve’s cheap money policies continue to bolster farm commodity prices, farm income, farmland prices and farm equipment sales. The Fed has indicated little change in this pro-agriculture money policy for 2013, which means we will likely continue to see healthy growth in farmland prices and farm equipment sales."

Farmland Price Index March 2013

Bankers were asked questions regarding inputs for 2013 and on average, they estimate a 6.5% increase in inputs over the next year. Bankers were also asked how much cash rents will increase in 2013; a 9.3% increase is expected.

Banking

The loan volume index increased to above growth neutral, 51.5, from 46.7 in February. The checking deposit index increased to 70.5 from 67.2 last month and the certificate of deposit and savings instruments decreased to 42.4 from 47.6 in February.

March's hiring index increased to 59.4 compared to 54.9 last month. The economic confidence index, which reflects expectations of the economy in the next six months, rose to 52.3 from 51.7 in February.

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

WASDE: Relatively Unchanged Balance Sheets

Mar 08, 2013

March's WASDE was lackluster, at best. The USDA continues to beg the question of credibility; an example being their estimate of U.S. soybean ending stocks remaining unchanged even as February's exports exceed year over year numbers. U.S. corn exports continue to suffer as the USDA lowered domestic exports by 125 million bushels the last two months.

Corn

U.S. ending corn stocks for 2012/13 were unchanged this month as an increase in feed and residual disappearance was met with increased imports, and lower exports. The USDA projected a 75 million bushel decrease in corn exports due to slow pace of shipments and expected competition from South American. Imports to the U.S. were increased by 25 million bushels due to increases in January's shipments. The season average price range was lowered 20 cents on the high end to $6.75 to $7.45 per bushel.
 
Global coarse grain supplies in 2012/13 were estimated 1.0 million tons lower due decreases in production from Argentina and South Africa. Global exports were lowered 1.9 million metric tons due primarily to the decline in U.S. exports.
 
Soybeans
 
U.S. 2012/13 soybean balance sheets are unchanged this month. Soybean ending stocks remain at 125 million bushels. Soybean exports through February were exceeding last year's pace, but competition from South America in the coming months are expected to reduce U.S. soybean exports. The projected season average price range has been narrowed by $0.25 on both ends of the range to $13.80 to $14.80 per bushel.
 
Argentina's soybean production was decreased by 1.5 million metric tons and we will continue to monitor South American production as it will greatly influence U.S. exports and price.

Wheat 
 
Domestic Wheat exports were lowered by 25 million bushels resulting in an increase of 25 million bushels for projected 2012/13 ending stocks. Competition from EU-27 and FSU-12 have decreased export prospects for wheat. The season average wheat price for 2012/13 was narrowed $0.10 at the midpoint to $7.65 to $8.95 per bushel.

Outlook
 
March's WASDE might be uninspiring, but as we approach spring and the beginning of planting season there should be plenty of fireworks to follow. One of the most influential points being whether or not the U.S. will plant almost 100 million acres of corn, the most planted since the 1930's.
 
For daily articles on farmland and agriculture, visit www.farmlandforecast.com 

Farmland Values and Farmer Income Continue to Rise

Mar 04, 2013

Temperatures in the Corn Belt have been steadily increasing throughout February and improved amounts of precipitation have been reported across much of the Midwest to help moderate drought conditions. Subsurface soil moisture levels are still dangerously low though as 57% of the U.S. is still in a moderate to worse drought. Farmers are hoping for abundant spring rainfall and for drainage tile lines to start flowing again; a sign of increased moisture deep beneath the surface. Agricultural commodity prices have been volatile while analysts have been tracking the latest planting estimates for corn, soybean, and wheat acreages in the Corn Belt. The looming threat of automatic U.S. Government spending cuts have also put investors on edge.

Grain Prices

Corn prices decreased by 2.8% this month, closing at $7.19 per bushel on the front month contract. Reports by USDA and other independent third party companies of record corn production in Brazil and the U.S. led prices lower in early February. The USDA estimated Brazil's corn production at 72.5 million metric tons, a 2.1% increase from January's estimate. Additionally, the USDA estimated U.S. ending corn stocks 30 million bushels higher due to a 50 million bushel reduction in exports, primarily driven by increased Brazilian exports. Currently, the 2013 U.S. corn crop is projected at a record 14.350 billion bushels, up 35% year over year, according to the USDA.

Soybean prices slightly increased by 0.4% this month to close at $14.74 per bushel. U.S. soybean ending stocks were estimated 10 million bushels lower due to increased domestic soybean crush usage. The USDA increased the estimated production of Brazil's soybean crop to 83.5 mmt from 82.5 mmt due to a 10.4% increase in planted area from last year. Currently, the 2013 U.S. soybean crop is projected at 3.405 billion bushels, up 13% year over year, according to the USDA.
Wheat prices decreased by 9.2% this month, closing at $7.09 per bushel. The USDA estimated domestic ending wheat stocks 25 million bushels lower to 691 million bushels due to increased domestic feed and residual use primarily driven by favorable wheat prices compared to corn. Increased precipitation across much of the Wheat Belt throughout February led to an ongoing bearish month. Ukraine is rumored to start exporting up to 2.0 mmt of wheat in late March. The U.S. Dollar will affect future domestic wheat prices due to the large amount of wheat competition around the globe.

Farmland Values

Midwestern farmland values increased 16% in 2012, the third largest gain in the last 35 years, according a survey from the Federal Reserve Bank of Chicago. Farmland values increased 20% to 25% in the Southern Plains in 2012. The seventh consecutive quarter that both irrigated and non-irrigated farmland appreciated more than 20% year over year, according to a survey by the Federal Reserve Bank of Kansas City. Despite the worst drought in over 55 years, high commodity prices and record farm incomes drove demand for agricultural land. Survey respondents expect the momentum to continue the next twelve months based on the record income expectations for 2013.

The Creighton University farmland price index decreased for the third straight month to 67.0 from 71.5 in January. This marks the 37th consecutive month the index has remained above growth neutral. The farm equipment sales index rose to 65.8 vs. 63.8 last month. Economist Ernie Goss commented, “Based on our surveys over the past several months, 2013 is stacking up to be a good year for farm income according to bankers. This is showing up in healthy growth in farmland prices and the sales of farm equipment.”

Bankers were asked questions this month in regards to corn prices in the coming year. Bankers believe that a price below $3.86 per bushel would threaten repayment of farm loans. They also estimated that a corn price of $4.84 per bushel would be the breakeven point for farmers who rent their land.

South American Crop Conditions

The USDA estimated Argentina's soybean production 3.7% lower this month at 53.00 mmt and Brazil's soybean production 1.2% higher this month at 83.50 mmt. The weather in Argentina has been very dry and we are monitoring the production outlook and weather forecasts for precipitation. Brazil's soybean crop appears to be very healthy, although wet conditions have delayed harvest in many regions, thus even further delaying the planting of corn which follows soybean harvest.

Total corn production was estimated 3.6% lower this month to 27.0 mmt in Argentina by the USDA, due to persistent hot and dry weather. Brazil's 2013 corn crop was estimated 2.1% higher due to favorable conditions.

Brazil is experiencing major logistical issues at their ports as waiting times to load ships are as high as over 50 days in Paranagua and over 40 days in Santos. The Brazilian infrastructure is proving that it cannot handle exporting additional crops.

Outlook

In the upcoming weeks, planting acreage forecasts and weather in the U.S., soybean yield data in South America, and the strength of the U.S. Dollar will affect the grain markets. Despite the enthusiasm surrounding agriculture, we feel farmland can still be sourced at undervalued prices and the growing demand for crops produced on land located in the Corn Belt will accelerate well past 2013. Farmers are expected to plant 254 million acres, the second highest acreage on record in the U.S., but demand has continued to strengthen as well.

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

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