Spring Planting Progresses
Jun 01, 2011
High levels of rain across much of the Corn Belt continued to delay planting this month, although farmers have been working around the clock trying to make up for lost time. As of Monday, May 23rd, 79% of the entire U.S. corn crop had been planted, compared to 92% in 2010 and the 5-year historical average of 87%.
Federal Reserve Banks in the Midwest released their quarterly farmland value reports which confirmed the steady increase of farmland values across the entire Midwest over the past 12 months. Farmland values increased 16% over the past 12 months, and 5% in the first quarter of 2011.
Corn prices decreased by 0.9% this month and closed at $7.47 per bushel during a volatile month of trading. Corn for July delivery was down as much as 9.3% earlier in the month on the favorable planting weather, but increased global demand and concerns over yield loss associated with a delayed planting season helped rally prices in the latter half of the month.
Soybean prices decreased by 1.2% in May, to $13.76 per bushel due to favorable planting conditions early in the month. Soybeans for July delivery significantly increased in price in mid-May due to the concern over excess moisture during the planting season. We continue to monitor the planting progress of corn to see if the acres allotted to soybeans will increase or decrease depending on if farmers choose to not plant late corn.
Wheat prices increased this month to $7.82 per bushel, a 1.7% increase. In early May, wheat prices decreased alongside corn and soybeans on favorable weather conditions in the southern plains, but wheat prices rallied towards the end of the month due to adverse weather and crop conditions across all wheat producing areas of the world. On the last trading day of the month, prices fell 4.6% due to the announcement by Russia that the Russian wheat export ban will be lifted on July 1, 2011. Watch the crop conditions of winter wheat from the USDA as crucial plant development stages are starting to occur.
The USDA’s May update of balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report was viewed as bearish for grains due to the USDA’s increase in old crop corn and soybean ending stocks. Wheat ending stocks went unchanged.
Estimated U.S. corn yields were decreased to 158.7 bushels per acre, which is 3.0 bushels below the USDA trend line, due to the slow start to planting. The estimated 2011/12 corn stocks to use ratio was projected at 6.7% which is still extremely low, but above the current 2010/11 5.4%.
The USDA estimated the average U.S. soybean yield at 43.4 bushels per acre, down 0.1 bushels from 2010, but at the USDA trend line for 2011. Reduced soybean exports have led to the increase in ending stocks.
Farmers have been busy planting corn when the weather has allows for field work. Corn planting progress is only 8% behind historical averages at this point which will ease concerns over soybean planting progress. Farmers will move on to plant their soybeans as soon as corn planting is complete. The amount of corn emerged from the ground is 14% behind the historical average.
Soybean planting progress is only 10% behind both the historical average and 2010 statistics for this time of year with 41% of the total U.S. crop already planted. Analysts have been speculating that more soybeans will be planted this year due to the delayed planting of corn. Now that corn and soybeans have caught back up to near historical planting levels, we will monitor the growth progress in the weekly USDA Crop Progress Reports.
Farmland values in the Midwest increased 16% over the past 12 months, matching the largest increase since 2007 and last exceeded in 1979 according to the Seventh Federal Reserve District. In the first quarter of 2011, farmland values rose 5%. Farmers have been encouraged to take advantage of high commodity prices by purchasing additional land and expanding operations.
The survey by the Federal Reserve Bank of Chicago found that there was more demand for farmland in the last six months ending March 2011 compared to the same period ending in March 2010. Farmers made up the majority of farmland buyers over the last six months, which is the typical farmland buying season. The number of farms sold, acreage sold, and the amount of farmland for sale all increased as well.
Illinois, Indiana, and Iowa had farmland value increases of 17%, 19%, and 20% respectively, over the past 12 months. Michigan and Wisconsin also had strong increases of farmland values of 11% and 9% respectively. Illinois and Indiana both had quarterly increases of farmland values of a lofty 8% in the first quarter of 2011.
Farmland values have continued their strong rally into the second quarter of 2011 thanks in part to the elevated commodity prices and bright outlook for long-term commodity prices fueled by foreign demand. Typically farmland selling slows down in April and May due to planting, but this season an abnormal amount of farmland is still coming to the market. The delayed planting season has given landowners an opportunity to sell unworked land for a longer period than historically normal.
We expect farmland values to continue their rally through 2011 due to elevated crop prices and dangerously low supplies. The USDA yield estimates are made based on a best case scenario and any unexpected weather patterns could have an adverse effect on yields. If the southern plains or European drought worsens, we expect grain prices to immediately increase and will continue to energize the rally in farmland values.
Read more about agriculture and farmland at http://farmlandforecast.colvin-co.com.