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April 2011 Archive for Farmland Forecast

RSS By: Marc Schober,

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

Rural Economy at Four Year High

Apr 28, 2011

The rural economy soars to its highest level in nearly four years as rising farmland values, recovering employment market, and improving banking conditions have improved to the rural economic outlook.

The overall Rural Mainstreet Index (RMI) improved to 59.4 from 56.7 in March, according to the survey of bank CEOs in a 10-state region. This marks the sixth straight month the index is above growth neutral 50.0 and well above the reading of 44.2 last April.

Farmland Forecast   2011 RuralMainstreetIndexFarmlandForecastColvinSchober1

“Higher oil prices have yet to derail or even slow the pace of growth for the Rural Mainstreet economy.” Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005,” said Creighton University economist Ernie Goss, co-author of the report.


Farmland prices continue to see record prices as the farmland index remained above growth neutral for the 15th straight month. The farmland index increased to 77.6 from March’s 75.0 and well above last April’s 59.6. Bankers continue to expect strong farming conditions, but are concerned about rising crop expenses.

Farmland Forecast   2011 FarmlandForecastPriceIndexGreysonColvin1

The farm equipment sales index declined slightly to 74.2 from 75.9 in March, but still displaying strength in the farming sector. “Firms linked to agriculture or energy are experiencing very healthy growth and growth prospect. On the other hand, Rural Mainstreet companies that are not tied to the farm economy continue to experience very little growth,” said Goss.


Loan volumes improved in April to 58.1 from a reading of 47.1 in March due to seasonal loan demand. Checking deposits declined to 65.5 from 68.7 in March, but certificate of deposits increased to 48.5 in April from 45.5. Bankers also noted they expect mortgage rates to increase 0.5% to 1.5% by the end of 2011.

The rural economy continues to add jobs for the fifth straight month as the jobs index increased to 56.9 in April from March’s 56.2. “Rural areas are outpacing the urban areas in terms of job growth. However the gap between urban and non-urban is closing,” said Goss.

Rural bankers continue to expect sustainable growth over the next six months in the rural economy, although the economic confidence index declined to 61.0in April from March’s reading of 65.2 as the tragic events in Japan and budget concerns in Washington weighed on banker’s outlook.


The rural economy continues to lead the way as the global economy continues to improve. Unexpected economic challenges will continue to cause some bumps in the road, but strong farm income and farmer spending will keep the rural economy steaming ahead.

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Crop Progress: Planting Delayed Even Further on Wet Weather

Apr 26, 2011

Today, the USDA released its weekly planting progress report. Progress in corn planting is extremely behind last year’s record pace, with only 2% of the crop being planted last week, 9% of the corn crop is already in the ground for the 18 primary producing states. This compares to a 5 year historical average of 23% in similar time periods, and 2010’s estimate of 46%.

The winter wheat crop condition continues to deteriorate each week. Of the 2011 crop, only 35% is in excellent or good condition, compared to 69% one year ago. In 2010, 6% of the winter wheat crop was in poor or very poor condition while 40% is in such condition at this time in 2011. Strong winter wheat producing states have been continuing to miss critical rain storms.

Cotton planting progress is at 15%, which is on pace with the 5 year average for the week of 16%. Spring wheat planting is still well behind the 5 year historical average with only 6% of the 2011 crop planted compared to the historical average of 25% by the fourth week in April.

Corn prices increased 1.4% over the past week ending at $7.62 per bushel, soybeans were also up 3.3% to $13.89 per bushel, and wheat ended the week up 6.6%, closing at $8.26 per bushel. Grain prices increased substantially this past week on growing weather concerns across the globe. Portions of the Midwest have had twice the average precipitation over the past month, while some states have had the wettest April on record. Year-over-year corn prices are up 116.5%, soybeans are up 39.0%, and wheat is up 76.5%. Next week, we will look forward to reporting USDA estimates of emerged corn, and planted soybeans along with the usual planting progress.

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Crop Progress: Planting Already Behind Schedule

Apr 18, 2011

Today, the USDA released its weekly planting progress report. Progress in corn planting is well behind last year’s record pace, with 4% of the crop being planted last week, 7% of the corn crop is already in the ground for the 18 primary producing states. This compares to a 5 year historical average of 8% in similar time periods, and 2010’s estimate of 16%.

The winter wheat crop is still in much worse condition than last year at this time. Of the 2011 crop, only 36% is in excellent or good condition, compared to 69% one year ago. In 2010, 6% of the winter wheat crop was in poor or very poor condition while 38% is in such condition at this time in 2011.

Cotton planting progress is at 9%, which is slightly lower than the 5 year average for the week of 12%. Spring wheat planting is well behind the 5 year historical average with only 5% of the 2011 crop planted compared to the historical average of 12% by the third week in April.

Corn prices decreased 3.3% over the past week ending at $7.51 per bushel, soybeans were also down 2.6% to $13.44 per bushel, and wheat ended the week down 3.0%, closing at $7.75 per bushel. Crop prices decreased because of the speculation around central banks increasing interest rates to battle inflation. Year-over-year corn prices are up 116%, soybeans are up 37.7%, and wheat is up 66%. Next week, we will look forward to reporting USDA estimates of emerged corn, along with the usual planting progress.

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The Future of Farming Goes Vertical

Apr 05, 2011

Farmland is being lost at an alarming rate across the entire world due to urbanization, desertification, and erosion. More than one acre of U.S. farmland was lost per minute from 2002 to 2007, due largely in part to development, according to the American Farmland Trust. The world’s population is set to hit 9.2 billion by 2050, according to the U.N., and crop production yields are not going to be able to increase fast enough to meet global demand.

In order to feed the world’s growing population and food needs, the traditional concept of farming may take a new direction. What if instead of expanding crop production on a horizontal level, as in expanding land, crop production is expanded in the other dimension, vertically?

The concept of vertical farming, which takes land expansion to the next dimension, was created by Prof. Dickenson Despommier of Columbia University. Vertical farms are large structures, like office buildings, where each level is filled with crop production. It can be thought of taking a greenhouse and stacking 25 of them on top of each other.

Farmland Forecast   Chris Jacobs Vertical Farm Marc Schober Greyson Colvin

Vertical Farming

The concept behind vertical farming is to produce crops in an urban environment to feed city residents. Producing the crops near the end user is much more efficient and cuts down and transportation costs and pollution. The distance it takes for fruits and vegetables to travel to Chicago from where they are grown can be upwards of 2,000 miles.

All of the crops grown in vertical farms are planned to be grown hydroponically. Hydroponic means that plant roots sit in a material, like wall insulation, instead of soil. The roots are then exposed to a constant stream of nutrient rich water that is absorbed by plant roots. Researchers have discovered that plants can absorb mineral nutrients through water and soil is not essential to plant growth.

Hydroponics and vertical farming creates farmland without the need for soil while having the potential to produce 20 times the yield amount of outdoor practices using 1/10 the amount of water, according to Prof. Despommier. Vertical farms are capable of growing food year-round. As soon as a plant matures, another takes its place. There is no down time and since no soil is being used, crops can continually grow.

Vertical farms will also be used for water treatment, by taking in black city water and converting it to the water used in the hydroponic planting methods. The collected solid portion of the black water can be used as biofuel and burned to help generate electricity. In addition to using converted black water, vertical farms will collect water of evapotranspiration to create potable water.


No large scale vertical farms have been built yet, but architects have been busy creating concepts. Many of the concept buildings make use of wind turbines on their roofs alongside solar panels to help offset electricity needs.

Light will ultimately become a limiting factor for crop yields as light is not available to the entire vertical farm at the same time. Plants nearest to parameter windows will receive more sunlight than interior plants. A simple solution would be to add grow lights throughout the facility, but the costs associated with grow lights are too high. Many of the designs for vertical farms try to solve the issue of low light through creative design.

Farmland Forecast   Pyramid Vertical Farm Eric Ellingsen Disckson Despommier Marc Schober Greyson Colvin

Cost will always be the underlining issue on new advances in farming, but when food supply levels get to the point where vertical farming is cost effective, there will be a race for new technologies. Building costs are difficult to estimate as there are not any comparable projects yet. Prof. Despommier estimates it would costs roughly $83 million for the total building costs. Below is the breakdown:

• Sub-structure and electro-chromic glass shell - $25,000,000
• 1000 ton Geothermal HVAC - $2,500,000
• 400 ton chiller + cooling tower - $500,000
• Biogas to fuel cell cogeneration facility - $11,000,000
• 800 kWh/day tracking photovoltaic array - $500,000
• 4,500 kW water-cooled lighting system - $2,000,000
• Energy infrastructure and automation systems - $35,000,000
• Living machine-based water recycling system - $500,000
• Floating garden hydroponic system - $1,700,000
• Office and laboratory facilities - $5,000,000
Total Building Cost for vertical farming is around $83.7 million

Including maintenance and operations, total costs would reach $100 million. This sounds like a large number, but if commodity prices rise high enough, vertical farming may be costs effective due to its efficiency in yields and reduction in transportation costs.

The construction and maintenance of vertical farms will require a lot of human work in order to carry out all planting, harvesting, and maintenance involved with the farm. Job creation will be a large benefit of vertical farming.


The growing demand and high grain prices will demand new technologies, including vertical farming, but we don’t quite know when that day will come. Traditional farms cannot keep up with growing food demand and the concept of vertical farming is a great alternative method to grow fruits and vegetables.

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Natural Disaster & USDA Reports Weigh on Markets

Apr 04, 2011

The devastating earthquake and tsunami wreaked havoc on Japanese ports, feed mills, and livestock operations in early March sending a shock through the financial markets, including the grain markets. Japan is the largest importer of U.S. corn, which put a lot of pressure on the corn prices in the days following the quake.

The short-term effects of the quake included damaged ports and decreased demand for grains, but the outlook on the port damage is not as severe as initially estimated and imports may be differed to other ports in Japan to accommodate.

The long-term effects of the Japanese disaster have not yet been totaled. Radiation that has been emitting from the damaged nuclear reactors could potentially harm farmland near the power plants for more than 30 years. Radioactive material can deposit in the soil and continue to emit radiation to growing plants for decades. This radiation can then be ingested by humans who eat the crops grown on the contaminated soil. Japan is the second largest buyer of U.S. wheat and rice while the third largest buyer of U.S. soybeans.

Besides the Japanese quake, grain markets were greatly affected by the March 31st USDA reports consisting of Prospective Plantings and Quarterly Grain Stocks. The reports came as bullish news for corn, soybeans, and wheat as grain prices increased up to 5% following the reports.

Grain Prices

Corn prices decreased by 4.2% this month and closed at $6.93 per bushel due to the Japanese disaster and continued unrest in the Middle East. Corn prices for May delivery fell by 18.5% following the quake only to recover mid-month making up nearly 75% of its loss, largely impart by other importers buying grain at low prices. Domestically, corn stocks remain tight with USDA estimated ending corn stocks for 2010/11 at 675 million bushels. The end of the month USDA quarterly stocks report helped drive prices limit up, but it wasn’t enough to make up all the ground lost earlier in March due to the quake.

Soybean prices increased by 4.0% in March, to $14.10 per bushel due to the acreage battle between corn and soybeans. Farmers, particularly in the South, have been debating between planting cotton or corn while soybean acreage has been cut in the Corn Belt due to the high price of corn. The price of soybeans has also been affected by the mid-month foreign demand that purchased U.S. grains while taking advantage of the low prices, similar to the corn markets.

Wheat prices also declined this month to $7.63 per bushel, a 2.5% decrease. The price of wheat decreased alongside corn and soybeans after the Japanese disaster. Wheat prices strengthen mid-month on growing foreign demand which was fueled by export cuts in the FSU. The USDA acreage report revealed higher than expected spring wheat acres to be planted in 2011, but the bullish report for corn and soybeans helped support a rally in wheat to close out the month.


The USDA updated the U.S. and World balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report in mid-March. March’s report is typically quiet, but growing grain demand has kept each WASDE report under close watch.

Corn ending stocks in the U.S. went unchanged at 675 million bushels while the stocks to use ratio currently sits at 5.0%, a 15 year low, which will continue to grab investor’s attention. Soybean stocks were also unchanged at 140 million bushels and the stocks to use ratio of 4.2%. Wheat ending stocks were increased by 25 million bushels due to a decrease in U.S. exports.
In order to achieve the USDA baseline projection for corn yield in 2011 of over 160 bushels per acre, growing conditions must be perfect. Spring has been wet so far and any additional rainfall in the Midwest will greatly affect the length of the growing season which will equate to lower U.S. yields and potentially higher grain prices.

Acreage & Stocks

On the 31st, USDA released its Prospective Plantings and Quarterly Grain Stocks reports. The Prospective Plantings report marked 92.2 million acres to be allocated to corn production in the U.S. in 2011. The corn acreage figure came in slightly higher than analyst expectations prior to the report’s release. Corn futures traded limit up after the Quarterly Grain Stocks report revealed corn stocks to be 15% lower as of March 1, year-over-year due to strong ethanol, feed and export demand.

Soybean acreage for 2011 was estimated at 76.6 million acres, 1% lower than in 2010 and well below analyst expectations. Stocks of soybeans were estimated 2% lower year-over-year, at 1.25 billion bushels, due to increased exports and residual use.

The March USDA reports estimated wheat acres for 2011 at 58 million, about 1 million acres higher than market expectations. The outlook on wheat prices is not as bright as corn and soybeans as wheat stocks were estimated 5% higher year-over-year at 1.42 billion bushels. The export ban which is still being imposed in Russia could still support these elevated wheat prices through summer.


Farmland prices continue to remain above growth neutral for the 14th consecutive month according to the Rural Mainstreet Index, but March’s reading declined slightly to 75.0 from its recent high of 75.9. Bankers continue to note strong sales in their region, but some are concerned rising fuel prices could pressure farm income.

Recent sales of farmland have proven the strength of the current rally in farmland values. Good quality Iowa farmland has increased 19.7% since September, 2010, according to the Iowa Farm and Land Chapter No. 2 of the Realtors Land Institute. We expect farmland values to continue their appreciation moving forward.


The March USDA reports saved the grain markets during a very volatile month for the markets. It is hard to see more upside in the grain markets, especially at these high prices, but demand is still the driving force behind these prices. A lot can go wrong during the growing season, and at the very tight stocks we currently have on grains, prices still have upside potential.

Both the short-term and lasting effects from the Japanese quake will undoubtedly play into the grain markets. As each news story breaks about the condition of a feed mill or livestock operation expect grain prices to react. We expect grain demand to stay strong throughout 2011. If Japan’s demand for grain decreases, other importers of U.S. grain will fill any voids, as the case mid-month.

Grain markets will slowly shift their attention to the upcoming weekly USDA planting progress reports that track crop planting progress, conditions, and growth stages. Weather will also play an extremely large role in the grain markets through the rest of the year.

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Corn Plantings to Rise; Prices Jump on Supply Concerns

Apr 01, 2011

Grain prices are back in the headlines and futures prices are limit up as the USDA updated their 2011 plantings and quarterly grain stocks. The USDA expects big increases in corn, wheat, and cotton acres as farmers attempt to capitalize on high grain prices. Grain stocks are also reported at tight levels due to strong global demand.

Prospective Plantings

Farmers are expected to plant a total of 239.4 million acres of corn, soybeans, wheat, and corn in 2011, the USDA said in its annual “Prospective Plantings” survey, up nearly 10% over 2010. "Planted acreage is expected to be up in most states compared to last year due to higher prices and grower expectations of better net returns," the USDA said in the report.

Corn acres were estimated at 92.2 million acres, a 5% increase from 2010 and 7% higher than in 2009. The U.S. is the world’s largest corn producer and exporter and the 2011 crop is the second highest planted acres since 1944. Iowa, Kansas, Nebraska, North Dakota, Ohio, and South Dakota are all expected to increase corn acreage greater than 250,000 acres.

Soybean acres declined by 1% from last year to 76.6 million acres, but will still be the third largest soybean planting on record. Total wheat acres are forecasted to be 58.0 million acres, up 8% from 2010. Cotton acreage is forecast at 12.6 million acres, a 15% increase from 11.0 million acres last year.

Quarterly Stocks

Corn stocks as of March 1 were 6.52 billion bushels, down 15% from last year due to strong ethanol demand, exports, and feed demand. The market was caught by surprise as analysts were expecting stocks to be 6.7 billion bushels.

Soybean stocks were also lower at 1.25 billion bushels, down 2% from March 1, 2010. The soybean stocks were 50 million bushels below what analysts had forecasted. Stocks of wheat increased over the last year by 5% to 1.42 billion bushels due to the large U.S. crop last year.


The market took an immediate bullish reaction to today’s reports as corn and soybeans were limit up within minutes of the opening. No major surprises in the plantings report, but difficult weather could always change things. The lower than expected stocks are just another sign of how tight grain supplies are and the vulnerability of the market to supply shocks.

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