Sep 23, 2014
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August 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.

Land Values Rise 19% Despite Decreased Farm Income

Aug 21, 2013

For the third straight year, farmland values in the Tenth Federal Reserve District have increased by double digits, a record for the survey. However, farm income fell in the second quarter and bankers expect that income will decrease even further in the coming months due to the decline in crop prices.

Farmland Prices

Farmland values surged in the second quarter of 2013. Year over year, Non-irrigated farmland values rose 18%, irrigated farmland values increased 25%, and ranchland values rose 14%. Bankers contributed the increase in farmland values to historically strong farm incomes and the overall wealth of the agriculture sector.

Kansas City Fed Farmland Values second quarter 2013

Farm Income

Farmer income declined in the second quarter of 2013, and bankers expect a further decline in the coming months. The poor winter wheat harvest and a decline in wheat prices were a major factor in lower farm income throughout the second quarter and forecasted into the third quarter. Increased global production of wheat pushed wheat prices lower, as well as ongoing weakness in the livestock sector. In addition, bankers expect a further income drop due to the outlook of lower corn and soybean prices at harvest. Currently, the U.S. is expected to harvest the largest corn crop on record and the third largest soybean crop.

Kansas City Fed Farm Loan Demand and Funds Availability second quarter 2013

Farm Loan Portfolio

Interest rates began to increase from two-year lows this past quarter. The average interest rate on farm real estate loans increase to 5.38% in the Tenth District.

Lower farm income increased the operating loan demand and stalled the loan repayment rates in the second quarter of 2013. Operating loan demand rose to its highest level in more than two years. Bankers believe that loan repayments will begin to slack as farm incomes continue to weaken and interest rates climb.

Outlook

Farm incomes have retreated from record highs, although a recent rally in the commodity markets could spark change. Moving forward, the weather across the central U.S. will have a great impact of commodity prices throughout harvest and farm incomes for the next year.

A total of 208 banks responded to the Second Quarter Survey of Agricultural Credit Conditions in the Tenth Federal Reserve District, an area that includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico, and the western third of Missouri.

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

 

Farmland Values Rise 17%

Aug 20, 2013

Year over year, "good" farmland values increased 17% across the Seventh Federal Reserve District, although for the second quarter of 2013, values remained unchanged. Four out of the five states within the Seventh District posted double digit annual increases in farmland values with Indiana leading the way with a 21% increase. For the second quarter, values remained nearly unchanged for the first time since 2009.

Chicago Fed Quarterly Farmland values second quarter 2013 marc schober

As many bankers forecasted farmland values to increase in the third quarter (7%) as did to decrease. The majority balance forecasted values to remain constant. Quarterly farmland values remained unchanged for the first time since 2009 due to sliding crop prices. Commodity prices have been in a downward trend via the outlook of a record corn crop and the third largest soybean crop on record. Additionally, the 2013 U.S. corn crop is on pace to be 28% larger than in 2012 and the soybean crop 8% larger than 2012's drought stricken crop.

Earnings

Crop prices remained relatively high throughout the second quarter. The average corn price was $6.97 per bushel for the quarter, down 1.0% from the first quarter, but up 9.8% from 2012. Soybean prices averaged $14.80 per bushel in this year's second quarter, up 2.1% on the first quarter of 2013 and up 6.5% compared to one year prior.

Credit

Farm loan interest rates increased for the first time since early 2011, according to the Seventh District Federal Reserve Bank. The increase occurred after reaching record lows in the first quarter of 2013.  

The average loan-to-deposit ratio was 64.6, increasing from the 19-year low experienced in the first quarter of 2013. On average, banks had more money to lend this quarter due to high crop prices and insurance payments from the drought of 2012.

Interest rates for operating loans and agriculture real estate loans increased slightly to 4.94% and 4.65% respectively.

Outlook

Commodity prices have significantly decreased thus far in the third quarter of 2013 on the outlook of a bumper corn crop and ideal weather conditions. Conversely, prices have started to increase in the past few days due to the dry weather outlook in the Corn Belt. Additionally, the Farm Service Agency (FSA) estimated 3.4 million acres of corn were lost to prevent plant this year and 1.6 million acres of soybeans. Moving forward, the FSA will release estimated prevent plant acreage on a monthly basis throughout harvest.

The Federal Reserve Bank of Chicago’s second quarter survey of Farmland Values and Agricultural Credit Conditions Report is a summary of the Seventh District’s value of farmland, farm loan portfolio performance, and on-farm income. The Seventh District consists of the entire state of Iowa, and portions of Illinois, Indiana, Wisconsin, and Michigan.

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

 

 

Crop Progress: Crop Conditions Inched Lower

Aug 19, 2013

Crop conditions will be the main focus moving into the fall harvest and corn and soybean conditions decreased over the last week. Will above average crop conditions be able to fend off the late planting season and shorter growing season? No one knows for sure, but we will be there every step of the way.

As of August 18, 2013, 13% of the corn crop was in poor or very poor condition, a 2% increase from last week. Corn in good or excellent condition was 61%, a 3% decrease from last week. Corn in the dough stage was 52%, compared to the five year average of 65%. Corn was 11% dented this week, behind the five year average of 30%.

Soybean condition was 10% of the crop in poor or very poor condition, a one percent increase from last week. Soybeans in good or excellent condition were 64%, unchanged from last week. Thus far, 92% of the soybean crop was in the blooming growth stage, 6% behind last year at this time. Soybeans setting pods were at 72%, compared to 90% last year at this time. 

Winter wheat was 96% harvested, compared to 97% last year at this time. Spring wheat was 18% harvested as of August 18, 2013, compared to 77% last year.

Corn prices increased 4.4% over the past week ending at $4.93 per bushel, and wheat prices ended the week at $6.41 per bushel, a 0.9% increase from last week. Year to year corn prices are down 40.7%, soybeans are down 24.6%, and wheat is down 28.8%.

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

Rural Economy Growing Slowly

Aug 19, 2013

The rural economy grew steadily over the past month, although weak crop prices has kept growth modest. Farm equipment sales dropped below growth neutral as farmers fear lower than expected income.

Dual Farmland Price and Rural Mainstreet Index August 2013

The Rural Mainstreet Index (RMI) decreased to 55.8 in August, from 57.3 in last month’s survey. Ernie Goss, economist at Creighton University, commented, "Last year at this time the drought was weighing on the Rural Mainstreet Economy. This year, weaker agriculture commodity prices are having a dampening impact on the farm economy and businesses tied to agriculture. Even so, the economy continues to expand at a reasonable pace according to bank CEOs."

The farmland price index decreased this month for the eighth time in the last nine months, but remains above growth neutral at 55.8. 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. I expect farmland price growth to continue to weaken as agriculture commodity prices soften."

Bankers estimate that only 20% of all farmland transactions are purchased by investors; this was the percentage given in the spring when Bankers were asked the same question. CEO of Citizens State Bank in Lena, IL, Fritz Kuhlmeier said," Local farmers have completely driven the nonfarmer investors out of the farmland market by elevating the prices over returns investors demand."

For the first time since 2009, the farm equipment sales dipped below growth neutral to 49.2, from 50.0 in July.

The loan-volume index decreased to a still healthy 70.5, from July's 75.7. The checking-deposit index declined to 51.7, from July's 53.7.

The hiring index declined to a 59.2 in August, from 60.7 in July. "Growth in hiring is definitely slowing for the region even though it remains positive. Businesses directly linked to agriculture and energy are either shedding jobs or adding them at a slow pace," said Goss. 

Chart of RMI August 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

USDA Weekly Exports: Corn Sales Dip Below the 10 Week Average

Aug 15, 2013

Weekly U.S. net corn sales for the week ending August 8th in the 2012/2013 marketing year were reduced by 59,100 metric tons (MT), a 135% drop from the prior 10 week average. Exports were reported at 377,400 MT, up 7% from the prior four week average, going primarily to Japan, Mexico, Guatemala, and Venezuela. For the 2013/2014 marketing year week ending August 8th, net corn sales were 836,100 MT, primarily sold to unknown destinations, Mexico, and Japan.

Weekly net soybean sales decreased by 120% from the previous 10 week average with a reduction of 10,500 MT for the 2012/2013 marketing year, mainly due to decreases from unknown destinations and South Korea. Exports were up 90% from last week, at 94,100 MT, going primarily to Japan, Mexico, Vietnam, Indonesia, and Taiwan. In the 2013/2014 marketing year ending August 8th, weekly net sales were reported at 1,893,400 MT, primarily sold to China, unknown destinations, and Japan. 

Weekly net sales of wheat were down 34% from the prior four week average at 490,100 MT for delivery in the 2013/2014 marketing year ending August 8th, mainly due to sales in Brazil, Sri Lanka, Nigeria, China, Japan, and Yemen. Exports of 709,900 MT went primarily to Brazil, China, Mexico, Chile, Sri Lanka, Nigeria, and South Korea.

Export report graph 8 15

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

Crop Progress: Corn Conditions Unchanged

Aug 12, 2013

Today's Crop Progress report is neutral, but the Supply and Demand report from earlier today proved bullish for corn, soybeans, and wheat. Crop conditions will be the main focus through the critical August growing days.

As of August 11, 2013, 11% of the corn crop was in poor or very poor condition, compared to 51% last year at this time. Corn in good or excellent condition was 64%, compared to 23% a year ago. Corn at the silking growth stage was at 94%, 1% behind the five year average. Corn in the dough stage was 32%, compared to the five year average of 48%. Corn began denting this week, with 5% dented compared to 39% at this time last year.

Soybean condition was 9% of the crop in poor or very poor condition, compared to 38% last year. Soybeans in good or excellent condition were 64%, compared to 30% last year. 88% of the soybean crop was in the blooming growth stage thus far, 8% behind last year at this time. Soybeans setting pods were at 58%, compared to 81% last year at this time. 

Winter wheat was 92% harvested, compared to 94% last year at this time. 8% of the spring wheat crop was in poor or very poor condition, compared to 11% last year. Spring wheat in good or excellent condition was 66%, compared to 61% last year at this time. Spring wheat harvesting just began, with 6% harvested compared to 61% last year.

Corn prices increased 0.6% over the past week ending at $4.72 per bushel, soybean prices increased by 3.3% over the past week ending at $13.73 per bushel, and wheat prices ended the week at $6.35 per bushel, a 1.6% decrease from last week. Year to year corn prices are down 39.6%, soybeans are down 15.4%, and wheat is down 25.8%.

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

WASDE: Corn and Soybean Yields Descend

Aug 12, 2013

The USDA surprised analysts in this month's Supply and Demand Report with a decrease in corn yield and production. During the critical corn pollination period weather has been favorable over the majority of the Corn Belt giving analysts a reason to believe that yields, production, and stocks would travel in the other direction. One could argue the large gap between analysts and the USDA was in part due to the first survey based yield estimate of the year.

Corn

U.S. corn production for 2013/14 was estimated 187 million bushels lower, to 13.8 billion bushels. The first survey based corn yield forecast for 2013/14 lowered yields from 156.5 bushels per acre in July to 154.4 bushels per acre this month. U.S. ending stocks for 2013/14 were lowered by 50 million bushels, to 1,837 million, due to the decrease in average yield. The stocks to use ratio was estimated at 14.5%.

WASDE Ending Stocks August 2013

U.S. exports for 2013/14 were estimated at 1,225 million bushels, a 25 million bushel decrease due to increased global competition and decreased domestic supply. The season average corn price for 2013/14 was increased 10 cents at both ends of the range to $4.50 to $5.30.

Global corn production for 2013/14 was decreased by 2.7 million tons as decreased production in the U.S., Mexico, European Union, Russia, and Serbia is expected.

Soybeans 

U.S. average soybean yields in 2013/14 were decreased by 1.9 bushels per acre from last month, to 42.6 bushels. Harvested acreage was decreased 0.5 million acres to 76.4 million acres. Production for the 2013/14 year was decreased by 165 million bushels to 3.255 billion bushels due mainly in part of lowered harvested acres and a decrease in average yield.

Ending stocks for soybeans in the 2013/14 marketing year were lowered by 75 million bushels, to 220 million. Exports were also lowered, by 65 million bushels, due to reduced supplies and increased prices. The projected season average price range for 2013/14 was $10.35 to $12.35 per bushel, an increase of 60 cents on both ends of the range.

Wheat 

U.S. wheat exports for 2013/14 were projected 25 million bushels higher due to strong seasonal sales and a positive outlook for Chinese imports. Ending stocks for 2013/14 were lowered from 576 million bushels to 551 million. The season average wheat price for 2013/14 was estimated at $6.40 to $7.60 per bushel, a decrease of 10 cents a bushel at the midpoint.

Global wheat supplies for 2013/14 were increased by 7.5 million tons due to record production from some of the world's largest exporters. It is estimated that world production of wheat will produce a record 705.4 million tons.

Outlook

Over the next month, weather will play a key role in the development of soybeans. We will continue to monitor the weather and scout the Corn Belt for more information on the growing season.

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

USDA Weekly Exports: Corn Sales Above 10 Week Average

Aug 08, 2013

Weekly U.S. net corn sales for the week ending August 1st in the 2012/2013 marketing year were 290,100 metric tons (MT), a 116% improvement from last week’s sales and above the 10 week average. Exports were reported at 430,400 MT, up 31% from last week, going primarily to Japan, Saudi Arabia, Mexico, and Venezuela. For the 2013/2014 marketing year week ending August 1st, net corn sales were 220,900 MT, going primarily to Mexico, unknown destinations, Japan, and Columbia.

Weekly net soybean sales were increased by 1% from last week and 29% from the prior 4 week average to 79,400 MT for the 2012/2013 marketing year, mainly due to increases from Indonesia, Taiwan, Malaysia, Japan, and Thailand. A marketing year low of 49,500 MT of exports were down 45% from the previous 4 week average. The primary destination of these exports were Japan, Mexico, Vietnam, Columbia, and Taiwan. In the 2013/2014 marketing year ending August 1st, weekly net sales were reported at 1,017,600 MT, primarily from unknown destinations, China, and Egypt. 

Weekly net sales of wheat were at 726,200 MT for delivery in the 2013/2014 marketing year ending August 1st, mainly due to sales in Brazil, Japan, Taiwan, and China. Exports of 773,400 MT went primarily to China, Brazil, Mexico, Nigeria, Japan, Taiwan, and the Philippines.

Export report 8 8 GRAPH

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

Crop Progress: Cool Weather Stabilized Crop Conditions

Aug 05, 2013

During the crucial pollination period, cool and wet weather the past week was positive for corn conditions.
As of August 4, 2013, 11% of the corn crop was in poor or very poor condition, compared to 50% last year at this time. Corn in good or excellent condition was 64%, compared to 23% a year ago. Corn at the silking growth stage was at 86%, 3% behind the five year average. Corn in the dough stage was 18%, compared to the five year average of 31%.

Soybean condition was 9% of the crop in poor or very poor condition, compared to 39% last year. Soybeans in good or excellent condition were 64%, compared to 29% last year. 79% of the soybean crop was in the blooming growth stage thus far, 14% behind last year at this time. Soybeans setting pods were at 39%, compared to 69% last year at this time. 

Winter wheat was 87% harvested, compared to 89% last year at this time. 7% of the spring wheat crop was in poor or very poor condition, compared to 11% last year. Spring wheat in good or excellent condition was 68%, compared to 63% last year at this time. Of the entire spring wheat crop, 97% was headed, compared to the five-year average of 98%.

Corn prices decreased 4.1% over the past week ending at $4.69 per bushel, soybean prices decreased by 2.8% over the past week ending at $13.29 per bushel, and wheat prices ended the week at $6.45 per bushel, a 0.9% decrease from last week. Year to year corn prices are down 41.6%, soybeans are down 17.3%, and wheat is down 27.8%.

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

Nearly Perfect Pollination

Aug 01, 2013

The weather conditions during the critical corn pollination period have been ideal throughout late July, although farmers are concerned about a late maturing crop. Mild temperatures and adequate rainfall across much of the Corn Belt have been optimal for low plant stress during pollination. Weather risk is still very high for the current crop, although late pollination has been successful, putting downward pressure on the grain markets.

 

Uralkali, the world's largest potash producer, recently surprised the fertilizer markets by ending its production limits and cooperation with Belarus to acquire larger market share. The decision was welcomed by potash consumers in hopes of a more competitive market and lower prices moving forward. Uralkali will run at full capacity next year and potash prices are forecasted to drop to the lowest since 2010, according to Uralkali's CEO, Vladislav Baumgertner.

Grain Prices

December corn prices decreased by 6.3% this month, closing at $4.79 per bushel. The bearish June 28th USDA acreage report continued to lead corn prices lower in early July. USDA estimated a lofty 97.4 million acres of corn were planted during the worst planting conditions in the past 20 years. Mid-month, corn prices rallied on drier and much hotter weather conditions which could have a severe impact on the upcoming pollination period. Instead, weather conditions became very mild and favorable for pollination, which sent prices lower in late July. The USDA estimated U.S. corn production 55 million bushels lower due to decreased harvested area in the July WASDE Report.

Front month soybean prices decreased by 12.1% this month to close at $13.74 per bushel. The USDA estimated U.S. soybean production 30 million bushels higher in this month's WASDE Report, due to a 0.7 million acre increase in harvested area. Ending U.S. soybean stocks were also increased by 30 million bushels. Throughout late July, farmers were active selling soybeans, which led to a decrease in local price basis levels. Ideal weather conditions have also pushed soybean prices lower, although domestic supplies are still very low.


Wheat prices increased by 2.5% this month, closing at $6.64 per bushel. The U.S. average wheat yield was increase by 3.5% by the USDA in the monthly WASDE Report, but global demand has been increasing throughout the month in part by large purchases by China and Japan. Additionally, the U.S. winter wheat harvest is still slightly behind the historical average.

Farmland Values

The Creighton University farmland price index decreased in July for the seventh time in the last eight months, but remains above growth neutral at 58.2. Professor Ernie Goss noted, "Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices and expected declines in farm income are slowing growth in farmland prices."

In preparation of the upcoming buying season once crops are harvested, some farmers are selling farmland on a lease-back to acquire other farmland within their farming radius. We have been actively sourcing farmland for sale by farmers who will agree to lease back the land at market rental rates. Both private and public farmland sales have still been strong across the Corn Belt with buyers understanding that the long-term outlook for cropland is still favorable due to the compelling increase in long-term global demand of U.S. grown commodities.

Crop Conditions


As of July 28, 2013, 11% of the U.S. corn crop was in poor or very poor condition, compared to 48% last year. Corn in good or excellent condition was 63%. Soybean condition was 9% of the crop in poor or very poor condition, compared to 37% last year. Soybeans in good or excellent condition were 63%, compared to 29% last year. Winter wheat was 81% harvested, compared to 86% last year at this time.

 

Planting conditions were the worst in the past 20 years in 2013, which led to a very late maturing corn and soybean crop, thus we are very cautious of the crop conditions moving forward. Corn pollination appears to have been successful, but the risk of an early frost and lack of heat units continue to be much higher in 2013 than previous years. An early frost could be detrimental to the U.S. corn crop and prices would increase instantly.

Outlook 


We will continue to monitor the weather throughout the corn pollination period, but the moist and mild temperatures thus far have been ideal. Additionally, we are watching for third party crop condition reports and await to see if the large amount of unplanted acres in southern Minnesota and northern Iowa will be accurately reflected. Optimistically, cash corn prices have been extremely high at local elevators and ethanol plants across much of the Corn Belt. Some local buyers are paying over $2.00 above CBOT prices for August delivery and as high as $.80 above for December delivery. Typically December price basis is negative.

 

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

 

 

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