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September 2012 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 Fall Below One Billion Bushels

Sep 28, 2012

Corn stocks bullishly dropped below one billion bushels in the USDA's release of the Quarterly Grain Stocks report today. Soybeans came in within the expected range and wheat had a slightly bullish tone as stocks fell below estimates. Overall, this report gave a jolt to corn and wheat to the upside, which is surprising as most analysts predicted a neutral tone.

 

USDA Grain Stocks Report Table September 2012

 
USDA reported 988 million bushels on hand for September 1, 2012 below last year's 1.128 billion bushels. Of the total stocks, 314 million bushels are stored on farms, down slightly to last year. Off-farm stocks were at 675 million bushels, down 17% from a year earlier. June-August 2012 disappearance is 2.16 billion bushels, compared to 2.54 billion bushels a year ago.
 
Soybean stocks decreased 21% compared to last year with 169 million bushels as of September 1, 2012. Stocks stored on farms totaled 38.3 million bushels, a 21% decrease from last year. Off-farm stocks decreased to 131 million bushels, down 21% from last September. June-August 2012 disappearance was 498 million bushels, an increase of 23% from last year.
 

Wheat stocks decreased 2% from last year with 2.10 billion bushels being reported on September 1, 2012. On-farm stocks were estimated at 573 million bushels, down 9% from last September. Off-farm stocks were up 1% from last year, coming in at 1.53 billion bushels. The June-August 2011 disappearance was 908 million bushels, up 27% from September of last year.

 
Outlook
 
Corn and wheat prices have rallied this morning due to the surprising low stocks reported for both grains. Now our attention will be pulled towards harvest and the upcoming WASDE as we look forward to actual yield data. Look for our breakdown of the next WASDE coming out on October 11, 2012.

 

For daily articles on farmland and agriculture, visit

www.farmlandforecast.com 

 

Crop Progress: 39% of U.S. Corn Crop Harvested

Sep 24, 2012

U.S. farmers harvested 13% of the entire U.S. corn crop last week during favorable harvest conditions in the Corn Belt. Illinois has already harvested over half of their corn crop as of this week. Soybean harvest also progressed quickly with 22% of the entire crop already in the bins.

As of September 23, 2012 USDA estimated corn conditions remained unchanged with 24% of the crop in good or excellent condition, yet a 28% decline from last year at the same time. Harvest advanced week over week with 39% of the entire U.S. corn crop harvested compared to 26% last week and the five year average of only 13%. 88% of the U.S. corn crop was mature this week compared to only 58% last year at this point in the season. Corn prices decreased by 0.5% over the past week ending at $7.44 per bushel and year-over-year prices have increased by 14.8%.

Soybean conditions were at 34% in very poor or poor condition and 35% in good or excellent compared to 36% and 33% respectfully one week earlier. 73% of soybeans have dropped leaves compared to the five year average of 59% at the same time last year. As of the fourth week in September, 22% of U.S. soybeans have already been harvested compared to the five year average of only 8%. Soybean prices decreased by 3.5% over the past week ending at $16.10 per bushel and year-over-year prices increased by 27.9%.

Winter wheat planting progressed this week as 25% of the U.S. crop has already been planted, slightly behind the historical average of 27% by the fourth week in September. Wheat prices ended the week at $8.92 per bushel, a 1.6% increase from last week. Year-over-year wheat prices have increased 37.7%.

Visit www.farmlandforecast.com for daily articles on farmland and agriculture.

Farmland Price Index Soars

Sep 24, 2012

The Rural Mainstreet Index (RMI) remained below growth neutral for the third consecutive month, although the farmland price index jumped to its highest level since May. While farmer income is still strong, businesses linked to agriculture are experiencing retractions, according to bank CEOs.

The Rural Mainstreet Index increased to 48.3 from 47.1 in August and 47.9 in July. The RMI is inching higher but still posted below growth neutral for the third month in a row.

Rural Mainstreet Index September 2012

According to Creighton University economist Ernie Goss, “The drought continues to dampen economic activity for businesses linked to agriculture such as ethanol, and agriculture-equipment sellers. I expect food processors to take a hit later in the year as higher food prices work their way through the system.”

Agriculture
 
The farmland price index, which has been declining for three straight months, got a jump start this month and climbed almost ten points to 61.6 compared to 52.8 in August. This marks the 32nd consecutive month the index has been above growth neutral. The farm equipment sales index increased to an even growth neutral, 50.0, an enormous increase from the 38.3 it posted last month.

Farmland Price Index September 2012

Bankers were asked this month to project farmland price growth in the next 12 months. Answers varied, but on average, bankers believe there will be a three percent gain in farmland prices in the upcoming year. Bankers were also asked if they expect harvest to occur earlier than in previous years. Overwhelmingly, 91% of bankers believe harvest will take place earlier than normal.
 
Banking

For the seventh consecutive month the loan volume index has increased, to a 70.2 from 67.6 a month prior. The check deposit index decreased to 48.3 from 49.1 in August and the certificate of deposit and savings instruments increased to 38.4 from 33.0 in June. “As in previous months, the drought appears to be increasing the cash needs of farmers in the region. We have been tracking a reduction in the percent of farmland and farm-equipment cash sales and upturns in the degree of bank financing,” said Goss.

September's hiring index decreased to 50.9 compared to 51.9 in August. “Even though we tracked hiring growth for the month, the index is trending down. I expect job losses in the months ahead as the impacts of the drought spread to more and more Rural Mainstreet businesses,” said Goss.
 
The economic confidence index increased to 43.0 in September compared to 39.6 from last month. “The drought along with a lethargic national economy are negatively affecting the business confidence of bank CEOs in the region,” explained Goss.

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 

 

Crop Progress: Corn Conditions Improve as Harvest Progresses

Sep 17, 2012

Corn conditions improved this week by 2% as corn harvest progressed well ahead of historical averages. Favorable harvest weather over the past week in the Corn Belt has put downward pressure on grain prices.

As of September 16, 2012 USDA estimated corn conditions improved with 24% of the crop in good or excellent condition, yet a 27% decline from last year at the same time. Harvest is well underway with 26% of the entire U.S. corn crop already harvested compared to 15% last week and the five year average of only 9%. 76% of the corn crop was mature compared to the five year average of only 41% this week. Corn prices decreased by 4.2% over the past week ending at $7.48 per bushel and year-over-year prices have increased by 8.1%.

Soybean conditions were at 36% in very poor or poor condition and 33% in good or excellent compared to 18% and 53% respectfully one year earlier. 57% of soybeans have dropped leaves compared to the five year average of 37% at the same time last year. As of the third week in September, 10% of soybeans have already been harvested in the U.S. compared to the five year average of 4%. Soybean prices decreased by 2.6% over the past week ending at $16.69 per bushel and year-over-year prices increased by 23.2%.

Winter wheat planting has been slightly behind schedule as 11% has already been planted compared to 4% last week and historically 14% by the third week in September. Wheat prices ended the week at $8.78 per bushel, a 1.2% increase from last week. Year-over-year wheat prices have increased 27.6%.

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

WASDE: Grain Found Under the Rainbow

Sep 12, 2012

The USDA lowered U.S. corn yields slightly, but surprised the market by dramatically increasing stocks. Logic would state that as yields decrease, stocks would follow. But the USDA defies reality and has found a magic bin of 160 million bushels of 2011/12 corn, resulting in an increase of new crop ending stocks by 83 million. U.S. Soybean production and yields dropped this month and U.S. wheat balance sheets are unchanged.

Corn

 

The average corn yield in the U.S. declined by 0.6 bushels per acre to 122.8 bushels per acre, a slowdown from the 22.6 bushel reduction last month. The USDA’s yield estimate was well above the market expectation of 120.5 bushels per acre.

 

U.S. 2012/13 corn production was forecasted down 52 million bushels due to continued drought across the Corn Belt. Part of the decrease in production and yield was offset by increases and an early harvest in southern states.

 

Higher feed and residual disappearance for 2012/13 resulted in corn use increasing by 25 million bushels this month. U.S. 2012/13 exports were decreased by 50 million bushels due to competition from South America. Corn season-average farm price has been lowered $0.30 on both ends of the range to $7.20-$8.60 per bushel.

 

Ending corn stocks for 2012/13 were estimated at 733 million bushels, an 83 million bushel increase from August, and substantially higher than analysts’ estimate of 592 million bushels.

 

2011/12 feed and residual use was lowered by 150 million bushels due to increased availability of new corn as 11 percent of the 2012 crop was harvested by September 1, the start of the 2012/13 marketing year.

 

Global coarse grain supplies in 2012/13 were estimated to decrease 4.0 million tons, mostly due to the reduction prospects for EU-27, Serbia, Canada, and the United States. Global 2012/13 corn exports were also lowered by 1.8 million tons, with the largest reduction coming from the United States.

 

Soybeans

2012/13 U.S. soybean production has been projected down 58 million bushels to 2.634 million bushels due to decreased yields in the Midwest. Average soybean yield was projected at 35.3 bushels per acre, 0.8 bushels lower than last month's projection.        

 

Exports for 2012/13 were reduced by 55 million bushels to 1.05 billion bushels due to a reduction in supplies. U.S. 2012/13 ending stocks remain at 115 million bushels, but hit a record nine year low. The 2012/13 average soybean price was unchanged at $15.00 to $17.00 per bushel.

Wheat

 

2012/13 U.S. wheat balance sheet was unchanged this month with yield at 46.5 bushels per acre, production at 2.268 billion bushels, and ending stocks at 698 million bushels.

 

The season average wheat price for 2012/13 was projected lower to $7.50 to $8.70 per bushel.

 

Global 2012/13 wheat supplies were lowered 3.1 million tons mainly due to decreased production in Russia. Global wheat consumption for 2012/13 was decreased by 2.6 million tons due to decreased wheat feed and residual use in Russia and Kazakhstan.

Outlook

 

Drought has been the main focus in this year's growing season, but as we move into harvest, realized yields will become the primary driver of grain prices. Harvest has started and we look forward to actual yield data, as the USDA's estimated yield is higher than what analysts and we expected.

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

 

Crop Progress: Conditions Unchanged as Harvest Begins

Sep 04, 2012

Corn conditions remained stagnant this past week. Although farmers were hoping for rain during the summer months, now that harvest is upon us, rain will only act as a hurdle to getting into the fields and harvesting the crop.

 

As of September 2, 2012 USDA estimated corn conditions remained the same as last week with 22% of the crop in good or excellent condition, a 30% decline from last year at the same time. Harvest is underway and 10% of the entire U.S. corn crop has been harvested. 86% of the corn crop was dented and only 65% was dented at the same time last year. 41% of the corn crop was mature compared to the five year average of only 16%. Corn prices increased by 1.6% over the past week ending at $8.07 per bushel and year-over-year prices have increased by 8.2%.

 

Soybean conditions were at 37% in very poor or poor condition compared to 16% a year earlier. Soybeans in good or excellent condition were at 30%, a 26% decline from one year prior. 19% of soybeans have dropped leaves compared to the five year average of 9% at the same time last year. Soybean prices increased by 2.4% over the past week ending at $17.71 per bushel and year-over-year prices increased by 25.3%.

 

Almost all of the spring wheat has been harvested, 95%, as of September 2, 2012. Wheat prices ended the week at $8.66 per bushel, a 0.5% increase from last week. Year-over-year wheat prices have increased 20.9%.

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

 

Drought Supports High Grain Prices

Sep 04, 2012

Grain prices remained elevated throughout the month as the USDA decreased the estimated 2012 U.S. average corn yield per acre to a dismal 123.4 bushels per acre. Farmers have been preparing for a very early harvest this year due to the accelerated maturity of corn in such a horrific drought. Crop insurance adjusters have also been busy working with farmers on crop claims. Many farmers across the Corn Belt estimate crop insurance payments to become available in November which may provide a great opportunity to invest in farmland leading up to November.

 

Grain Prices

 

Corn prices traded sideways and closed at $8.02 per bushel and decreased by 0.5% in August due to the ongoing drought conditions which primarily offset a destruction in demand. The USDA decreased the estimated average 2012/13 U.S. corn yield by 40.0 bushels since the June WASDE to 123.4 bushels per acre in the August WASDE due to the worst drought in 56 years. Third party agribusiness, Pro Farmer, estimated the current crop at 120.25 bushels per acre. Demand was significantly decreased by the USDA by 1.5 billion bushels due to high prices causing demand destruction globally. Prices rallied towards the end of the month on the very strong fundamentals still present in corn and the outlook of a potentially wet harvest due to Hurricane Isaac.

 

Soybean prices decreased this month to close at $17.64 per bushel, a 2.5% increase. Prices increased due to a reduction in average yield by the USDA from 40.5 bushels per acre last month to 36.1 bushels per acre in the August WASDE. Total 2012/13 U.S. production was cut by 358 million bushels to 2.7 billion bushels due to the decrease in yields and harvested area. 2012/13 U.S. soybean supplies were projected 12% lower than last month to a nine year low. Foreign demand from areas outside of China, including Thailand and Vietnam, also supported soybean prices in August.

 

Wheat prices declined by 2.1% this month, closing at $8.70 per bushel due to profit taking late month. Prices followed corn and soybeans and were also driven by additional demand for wheat as a feed because wheat provides an alternative to expensive corn. The USDA estimated the average U.S. 2012/13 wheat yield 2% higher at 46.5 bushels per acre which increased total U.S. production by 44 million bushels. Reports of below average quality and yields of Russian and FSU wheat spurred a late month rally in prices.

 

Farmland Values

 

Farmland values rose 15% in the last 12 months, slowing down from last quarter due to concern over drought conditions, according the Federal Reserve Bank of Chicago. The value of "good" farmland increased 1% in the second quarter of 2012 compared to the first quarter of 2012, the smallest quarterly increase in two years. All District states posted year-over-year increases in farmland values and the largest year-over-year land value increase came from Iowa, with a 24% increase. Although there is concern over the recent drought conditions, a majority of bankers still believe there will be an increase or pause in farmland prices in the third quarter.

 

Nonirrigated farmland values increased by 3% in the second quarter of 2012 in the Tenth Federal Reserve District, according to the Federal Reserve Bank of Kansas City. Year-over-year, nonirrigated farmland values were up 26.4%, irrigated farmland values were up 28.2%, and ranchland values increased by 16.2%. Bankers felt that values in the Tenth District would hold steady throughout harvest.

 

The Creighton University farmland price index declined this month to its lowest level since July of 2009, but remained above growth neutral for the 31st consecutive month, posting a 52.8 from 58.6 in July. “The drought is putting a dent in farmland price growth and the purchase of agriculture equipment, including trucks.” said Professor Ernie Goss.

 

Farm Income

 

2012/13 farm income was estimated 3.7% higher this month by the USDA from $117.9 billion in 2011. Record crop prices will more than offset decreased yields to provide U.S. farmers with $122.2 billion in income this year. $30.0 billion of the $122.2 billion has been the estimated amount of crop insurance payments in 2012 of which $14.0 billion will be from the U.S. government, according to the University of Illinois. The value of the total U.S. crop is $222.1 billion, an all-time high. Food inflation was estimated as high was 4% by the USDA due to the surge in commodity prices since mid-June. Farmers who escaped the intense drought will earn much higher income with average yields and very high crop prices. North Dakota's 2012 farm income was estimated 39% higher year-over-year.

 

The 2012 forecasted farmer debt-to-assets ratio dropped to 10.2% according to the USDA. Since the USDA has been keeping record of farmer debt-to-assets ratios in 1960, 10.2% is the lowest on record. Farmer balance sheets have never been this conservative before, thus leading us to firmly believe that there are no signs of a farmland price bubble forming due to over leverage.

Farmland Forecast   Farm Sector Debt to Assets Ratio marc schober greyson colvin patrick cheney invest usda 2012

 

Crop Progress and Conditions

 

Corn conditions have continually deteriorated since early June dwindling to only 22% of the crop in good or excellent condition compared to 54% in 2011. The drought has sped up maturity causing 26% of the corn crop to be mature as of the last week in August compared to the five year average of only 8%. Harvest has been ahead of schedule as well with 6% of the corn crop already harvested compared to the five year average of only 2% by the end of August.

 

Soybeans are also maturing quickly due to the stress produced by the drought. 8% of U.S. soybeans have started dropping leaves compared to the five year average of only 4% by this time in the growing season. Only 30% of the soybean crop is in good or excellent condition which is severely behind 2011's 57% by the end of August. We will continue to monitor harvest progress throughout September and will also watch for actual yield data from farmers. The lingering effects of Hurricane Isaac could cause above average amounts of rainfall in parts of the Corn Belt that could lead to stalk lodging and substantially hurt corn yields during harvest.

 

Outlook 

 

Harvest will provide the first actual yield data that will either support or oppose the USDA's estimate of 123.4 bushels of corn per acre across the U.S. and grain prices will react accordingly. We will monitor the effects of Hurricane Isaac and other weather events that could cause excess moisture during harvest and hurt yields even further.

 

We feel that over the next few weeks, investors will have an opportunity to invest in farmland at an excellent time due to a lag in crop insurance payments. Farmers have been reporting that crop insurance payments are expected to arrive in November which will limit farmland purchasing power from the majority buyer of farmland; farmers. Since farmers make up nearly 75% of all farmland buyers, even conservatively committing a down payment from a farmer on land may be an issue until November. We have been able to recently source properties for sale at strong values and expect this to continue through harvest.

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

 

 

 

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