Many Risks Surrounding 2013 Crop
Sep 03, 2013
The weather across the Corn Belt has made a full circle from 2012's drought to the very wet spring of 2013 and now back to a moderate drought. The first four weeks of August in Decatur, IL have produced 0.09 inches of rainfall and 12 days above 85 degrees, reaching as high as 95 degrees. Farmers should typically be preparing for soybean harvest in the southern Corn Belt by now, but very late maturing crops are delaying the harvest season. The hot and dry weather is causing concern over both corn and soybean yields, but the inevitable upcoming frost could cause an even worse problem for immature crops in late September and through October.
December corn prices were nearly unchanged this month, closing at $4.83 per bushel. Extremely hot and dry weather across the Corn Belt in late August helped prices rebound after the successful pollination period ended in early August. The USDA estimated the average U.S. corn yield 1.3% lower in the August WASDE Report to 154.4 bushels per acre. The Farm Service Agency released a report in early August on the amount of Prevent Planted acres in the U.S. and found 7.711 million acres were unplanted due to wetness complications with 3.411 million acres being corn. 7.5% of the entire corn acreage in Minnesota was unplanted this year. Speculative buyers have been slowly converting their net short positions in the direction of net long over the past two weeks signaling a longer-term rally.
November soybean prices increased by 12.5% this month to close at $13.57 per bushel. There's a high concern of even an average first frost date that will severely damage soybean yields this year due to the extremely late planting dates across the Corn Belt. The hot and dry weather this month also hurt soybean plants during their pod filling stage which is directly correlated to yield. In this month's WASDE, the USDA estimated the average U.S. yield 1.7 bushels per acre lower to 42.6 bushels per acre. Ending stocks were also estimated 75 million bushels lower to an extremely tight 220 million bushels. The November 2013 soybean contract is currently trading at an all-time high.
The September wheat contract decreased by 3.3% this month, closing at $6.43 per bushel. Estimated ending U.S. wheat stocks were decreased this month by 25 million bushels due to increased exports, but a stronger U.S. Dollar in August kept prices from moving higher. Additionally, the USDA estimated world wheat production at a record 705.4 million metric tons.
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, which includes Iowa, Wisconsin, Illinois, Michigan, and Indiana, posted double digit annual increases in farmland values with Indiana leading the way with a 21% increase. In the Tenth Federal Reserve District, non-irrigated farmland values rose 18%, irrigated farmland values increased 25%, and ranchland values rose 14% year over year. The Tenth District includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, a portion of New Mexico, and Missouri.
The Creighton University farmland price index decreased this month for the eighth time in the last nine months, but remains above growth neutral at 55.8. Professor Ernie 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 estimated that only 20% of all farmland transactions are purchased by investors; this was the same percentage given in the spring when bankers were asked the same question.
As of August 26, 2013, only 59% of the U.S. corn crop and 58% of the soybean crop was in good or excellent condition. 22% of corn and 32% of soybeans were in good or excellent condition at this same point in 2012. Corn maturity is severely lagging with only 23% of the crop in the dented stage compared to 73% last year and the five year historical average of 45%.
Although corn pollination was completed in ideally mild temperatures, the extreme heat and dryness across the Corn Belt throughout August has put major stress on the crop filling kernels. Soybeans have also been stressed in the heat during the critical pod filling stage. At this point in maturity, even a historically average first frost date would cause yield loss in both corn and soybeans due to the late spring planting.
Crop conditions are below average in the U.S. Corn Belt and the weather outlook is not very promising as high temperatures and low precipitation dominate local forecasts. An early to average first frost date will continue to loom in many trader's minds throughout September.
Farmers will start to plan out the 2014 crop year post harvest and should be happy to find lower input costs. Major fertilizer costs have significantly decreased over the past two months partially due to the world's largest potash producer, Uralkali, ending their production limits. Potash prices were forecasted last month to eventually drop to the lowest since 2010.
For daily articles on farmland and agriculture, visit www.farmlandforecast.com