Tag Archive for: grain prices

Should the February WASDE Report Effect Planting Decisions?

Grain PricesWhile the release of the USDA’s latest World Agricultural Supply and Demands Estimates report on Tuesday had many hoping for an uptick in grain prices, the grain market decided to go lower by the day’s close, throwing many farmers and analysts for a loop.

Despite overall bullish numbers for domestic corn and soybeans, though less so for wheat, an expected record harvest in South America and projection of another record setting harvest in US fields this coming fall prevented the grain markets from reflecting those numbers.

Looking closer at the numbers, for US corn, the ending stocks estimate was lower than expected at 1.827 billion bushels. This is in large part thanks to a 75 million bushel increase in ethanol production. Lower gas prices have driven up demand for gas and ethanol, and have therefore kept the pace for ethanol production. Worldwide, the USDA estimated a 4.2 million metric ton increase in world corn demand, which offset the increased estimate of corn stocks modest production increases in Argentina and Ukraine more than enough to keep the world-wide report numbers for corn neutral to bullish.

For US soybeans, the US stocks estimate was lower than expected, at 385 million bushels. Similarly, the USDA’s estimate of world soybeans stocks was also lower than expected, at 89.26 million metric tons. This was aided by a 2.3 million metric ton increase the USDA’s estimate of world soybean demand. When these numbers are taken into account in light of pre-report expectations, they are neutral to bullish as well. However, traders took the record South American soybean harvest expected, and thus the markets reacted contrarily to what many expected based solely on the report numbers.

In wheat, the USDA’s report was bearish for both domestic and world supplies, with the domestic export numbers at 900 million bushels, down from 925 million bushels. This resulted in ending wheat stocks of 692 million bushels. Even though the USDA increased its estimate for world demand by 1.4 million metric tons, increased beginning stocks coupled with increases in production worldwide pushed estimates up more than expected, and wheat ended down 8 cents by the end of the day.

While some adopt a more pessimistic long-term view of the grain markets rallying, market analyst Bob Linneman of Kluis Commodities adopts a more sanguine attitude, and asserts that if crude oil begins an assent, grains will follow suit:

“Now that the USDA report has come and gone, I think grains have a chance to rally if oil can close above last week’s high of $54.24. The seasonal pattern for crude oil is higher through the first week of April. Although this pattern has not been accurate the past few months, if a rally is underway, then I want to watch the first week of April for an extreme to indicate that the seasonal pattern is back on track.”

Are you concerned about how the grain markets will affect your cropping decisions during the coming growing season? Contact a UFARM specialist; we are here to help.

Sources consulted:  Caldwell, Jeff. “WASDE numbers fail to rally grains as prices slip into Wednesday.” Agriculture.com. Meredith Agri Media. 11 Feb. 2015. Web. 11 Feb. 2015.  Hultman, Todd. “USDA Report Head Scratcher: Those are Bullish USDA Estimates?” DTN The Progressive Farmer. DTN. 10 Feb. 2015. Web. 11 Feb. 2015.

 

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When Will Farmland Values Moderate?

corn chart

Courtesy of USDA

Nebraska landowners and farmers are always on the lookout for trends and forecasts of what they can expect for weather, commodity prices, and farmland values. The prospect of rising interest rates and lower commodity prices have many wondering if the high land value they’ve grown accustomed to over the last ten years is about to change.

Opinions vary, but many analysts agree that, for now, farmland values have reached their zenith. While most don’t expect there to be a bubble burst, it is generally agreed that the going rate for acres won’t continue to rise, and may have reached a plateau for the time being.

According to Iowa State Economics professor Michael Duffy, “It’s going to be more akin to a tire that gets a nail in it, a slow letdown,” he says. “A lot of it will depend if commodity prices stay in this downward trajectory or they flatten out.”

Grain prices tend to cycle from high-profit to low-profit. Corn prices have averaged $4.77 a bushel between 2006-2012, which is likely a new plateau in comparison to what they were prior to 2006. While the recent USDA report held bullish reports for corn, the corn price could still drop lower should the 2014 crop yield higher than average, resulting in the possible lowering of land values. In turn, should grain prices remain lower or recede, farmers will have less net cash income—a major driver of farmland values.

On the other end of the opinion spectrum is Terry Kastens, an agricultural economist at Kansas State University. He contends that “U.S. farmland values are at a ‘tipping point’ and could fall as much as 10 percent in 2014 as commodity prices flatten out.”

After a somewhat surprising USDA farm report on January 10th, that reported more bullish than expected corn bushels, it would seem that Duffy’s statement is more accurate, and that a leveling off of commodity prices might sustain current farmland values.

In Nebraska, farmland values rose 13 percent in the third quarter, according to the Kansas City Federal Reserve branch, whose area includes Nebraska. Some agricultural bankers said these figures, while still an increase, illustrate a moderating of prices from other recent values.

With so many variables at play, it is next to impossible to predict with certainty what Nebraska farmland values will do next, but the broader context seems to support a slow-down when it comes to money for farm acres.  In the meantime, the 2014 growing season and subsequent yields for the new crop will further determine if farmland values will continue to moderate in our state.

Let the land management professionals at UFARM help you stay on top of all the latest business and marketing trends for your farmland.  Contact United Farm and Ranch Management today.

Sources: (Martin, Andrew. “Iowa Farmland Values Hit a Record High.” Bloomberg.com. Bloomberg Businessweek. 12 Dec 2013. Web. 31 Jan. 2014.) (Schafer, Sara. “3 Reasons Farmland Values Could Head South.” Agweb.com. Agweb.com, 21 Nov. 2013. Web. 31, Jan. 2014.) (Hubbard, Russell. “Farmland Values Increase for Nebraska, Iowa in Quarter.” Omaha.com. 25 Jan. 2014. Web. 31 Jan. 2014.)

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What Does The Latest USDA Report Mean For Landowners and Farmers?

USDA ReportsFour major crop reports were released on January 10th by the USDA. More bullish-than-expected data in the corn market came as a surprise to many market analysts after largely bearish predictions prior to the release of the reports. On the whole, the USDA reflected higher than anticipated estimated corn stocks, neutral bean stocks, and bearish wheat stocks.

The four reports—the Annual Crop Production, Grain Stocks, Winter Wheat Seedings, and World Agricultural Supply and Demand Estimates (WASDE)—are highly anticipated, as these reports set the basis for harvested acres from the previous growing season and set the tone for the grain and crop market outlook for the next growing season. The USDA’s monthly and annual reports are considered the most significant factors affecting the grain markets, and even slight changes in the reports’ numbers can have drastic implications on commodity prices and market reactions.

After higher than expected yields for corn and soybeans across most of the Midwest this fall, most analysts were anticipating the USDA to revise its numbers upward in its January report, and were expecting the corn outlook to remain bearish. The USDA’s downward revision of estimated corn bushels per acre combined with a higher demand number resulted in the lower corn stock estimates.

Looking at the numbers, for corn, the USDA estimates the 2013 U.S. average yield at 158.8 bushels per acre, which is down 1.6 bushels from the November forecast, but 35.4 bushels above the 2012 average yield of 123.4. The USDA said 6.38 billion bushels are stored on farm, while 4.05 billion bushels are stored in off-farm locations like grain elevators.

Area harvested for grain is estimated at 87.7 million acres, up slightly from both the November forecast and 2012.

In soybeans, the USDA increased its production estimate, boosting production to 3.289 billion bushels from its previous projection of 3.258 billion bushels. To get there, USDA upped harvested acres to 75.87 million acres from its previous 75.7 million acres estimate and adjusted the national average yield to 43.3 bushels per acre from 43.0 bushels per acre. The USDA set soybean stocks as of December 1 at 2.148 billion bushels, which is slightly smaller than the average pre-report estimate. Additionally, it’s the second-smallest soybean stocks figure since the 2003-04 marketing year. The USDA said 955 million bushels are stored on-farm, while 1.192 billion bushels are in off-farm storage.

In wheat, farmers planted 41.89 million acres of winter wheat this fall, down 3% from 2013, the USDA reported. Winter wheat seedings came in below the range of pre-report expectations. The USDA also reported that hard red winter wheat was planted on 30.1 million acres, which is up 2% from 2013. Soft red winter wheat was planted on 8.44 million acres, down 16% from 2013. White winter wheat was planted on 3.39 million acres, down 3% from last year. The quarterly Grain Stocks report said the U.S. has 1.463 billion bushels of wheat stocks, 399 million bushels stored on farm and 1.064 billion bushels stored off farm. (Micik, Katie. “USDA Reports Summary: USDA Trims Corn Crop.” DTN/The Progressive Farmer, 06 Jan. 2014. Web. 07 Jan. 2014.)

The January USDA numbers often yield unexpected data, and this year’s reports didn’t disappoint. If you’re a landowner looking for assistance managing the complexities of land ownership, please contact UFARM for a free consultation with one of our experienced land managers.