, ,

What did the August 12th USDA WASDE report hold?

As usual, farmers and traders alike braced for the USDA’s latest World Agriculture Supply and Demand Estimate (WASDE) numbers. Market corrections based on the monthly report’s numbers vary in intensity based upon how well they match up with pre-report, private estimates. While many question the impact of the USDA’s numbers for the longer term, the reports undoubtedly affect the grain markets for the short term, and whether the outlook is bullish or bearish.

The August report was released at 11 am on Tuesday, and the numbers reflect record production for both corn and beans. Farmers across the nation are estimated to grow 14 billion bushels of corn and 3.8 billion bushels of beans.

For corn, the record national average estiUSDA Reportsmate of 167.4 bushels per acre is still below the pre-report estimates. This brought ending stocks for 2013-14 corn to 1.181 billion bushels, and ending stocks for 2014-15 at 1.808 billion bushels, both below the range of pre-report estimate. Despite the record numbers, they were still slightly below trade expectations, and analysts are calling it slightly bullish for corn.

As far as corn yields are concerned, 11 states are expected to post new yield marks. The USDA also reported that ten key corn producing states have the highest number of ears on record so far. The estimated average cash price expectation for corn was lowered to 3.90 from 4.00. For soybeans, the WASDE report spelled bearish futures for soybeans and record-breaking production. Farmers will harvest 3.816 billion bushels of soybeans with a national average yield of 45.4 bushels per acre, the USDA said. This is 16 percent higher than last year.

As such, shortly after the report numbers were released, soybean trade numbers dipped double digits on news of the potential record crop. The report also indicated that the U.S. season-average soybean price for 2014/15 is forecast at $9.35 to $11.35 per bushel, down 15 cents on both ends.

The ending stocks estimate for 2013-14 soybeans was unchanged overall at 140 million bushels, although some numbers were changed in regard to supply and demand. As a result of the increased production estimates, the USDA increased ending soybean stocks for 2014-15 by 15 million bushels.

The report also indicated that Arkansas, Illinois, Louisiana, Mississippi, New York, Ohio and Pennsylvania could see record state soybean yields, and as of the end of last week, 71 percent of soybeans were rated in good to excellent condition, with development moving forward at a normal pace.

While these numbers are not good for beans, Al Kluis of Kluis Commodities cautions against making any rash decisions based upon quick market reactions after the report numbers are released. He reasons that the report’s estimates are not that far off of last month’s estimates, and the lower price trend has been underway for some time. Kluis notes, “If you’ve got hedges or crop insurance in place, there’s no reason to be panicking here. If we don’ t have an early frost, prices could bounce back in October.”

Do you have concerns regarding your land and the effects of the current report on the land rental rates? Let the experts at UFARM help.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact Us.

 

Sources consulted: Caldwell, Jeff. “Soybean Crop Size Flirting with a Record—USDA.” Agriculture.com. 12 Aug. 2014. Web. 12 Aug. 2014. Micik, Katie. “USDA Sees Record Corn, Soybean Crop.” DTN/The Progressive Farmer. DTN/Progressivefarmer.com. 12 Aug. 2014. Web. 12 Aug. 2014. “USDA reports record US corn, soybean production.” Reuters. CNBC.com. 12 Aug. 2014. Web. 12 Aug. 2014.

Nebraska Crop Progress

Nebraska Soybean ProgressLast week’s hot and dry conditions had Nebraska farmers out in force irrigating their thirsty crops. According to the USDA’s National Agriculture Statistics Service (NASS), for the week ending July 27, above normal temperatures and low precipitation across the state had the irrigation motors roaring. While the dry conditions helped hay harvesting and aided the wheat harvest in progress in the Panhandle, it also significantly drew on the soil moisture of corn and soybeans.
Despite the hot and dry weather last week, as far as crop conditions are concerned, Nebraska’s corn and soybeans are doing well. Corn conditions rated at 19 percent fair, 52 percent good, and 22 percent excellent, with 85 percent of corn silking complete—ahead of last year’s 77 percent.

Bean conditions rated, 21 percent fair, 55 percent good, 17 percent excellent, with blooming at 83 percent. This is slightly ahead of last year’s 80 percent and the 79 percent average. Pod setting is at 53 percent, well ahead of last year’s 22 percent at this time and the 30 percent average.

For alfalfa growers, the conditions across the state rate at 31 percent fair, 53 percent good, and 8 percent excellent. The second cutting was at 86 percent complete, near the 87 percent average, while the third cutting is 36 percent complete, well ahead of last year’s 5 percent and the 17 percent average.

As for crop conditions nationally, the lack of moisture saw conditions in both crops dip slightly, with a 2 percent dip in soybeans, although 71 percent of the crop was rated good or excellent. Pod setting was at 38 percent as of July 27, ahead of the normal 7 percent.

Corn across the region rates at 75 percent good or excellent, one percentage point lower than the previous week. It is important to note that the 75 percent good or excellent rating is a full 12 percent higher than the normal amount in the top two USDA categories.

While the crops in Nebraska and across the country are doing well, weather reports showing a lack of moisture possible in the early weeks of August—a critical growing point for soybeans—has many wondering if that might change. The effects of little to no moisture could be allayed if temperatures stay lower. With Nebraska forecast highs for the coming week to be in the low 80’s, few raindrops will not be as much as a factor.
According to the Commodity Weather Group, “The dryness has developed too late for major impacts to pollinating corn, but some minor soy losses are possible to pod-setting soy in drier sections of the southwest 1/4 of the belt in the next 10 days. Cool air will limit losses though, and an expected return of 11- to 15-day showers to the western Midwest would be in time to avert serious impacts. The 16- to 30-day is also similar to wetter across most of the Midwest, although confidence is still low. Regardless, heat risks remain low through August.”

Do you have concerns about the state of your crops as we head into the home-stretch of the growing season? UFARM Land Managers are on the ground and know firsthand what growing conditions are like in all parts of the state. Let the experts at UFARM help keep you informed about your land.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact Us.

 

Sources consulted:
Caldwell, Jeff. “Corn, Soybean Conditions Slip Slightly; Light Market Reaction Expected.” Agriculture.com. 28 Jul. 2014. Web. 29 Jul. 2014.
Nebraska Crop Progress and Condition. NASS. USDA.gov. 28 Jul. 2014. Web. 29 Jul. 2014.

When is it Time for a Landowner to Change Tenants?

Finding a new land tenantThe relationship between a landowner and a tenant—the farmer who farms the land—is similar to any relationship. There can be ups and downs, but hopefully, with good communication between the two parties, the business relationship flourishes and each partner feels that their goals are being met.

At a time with more volatility in both grain and land markets, these arrangements have been even more strained than normal, as landowners and tenants strive to come to agreements that are fair. While switching to flexible cash rent agreements have alleviated many of these issues, there are times when the business relationship no longer works. Often, issues have been slowly surfacing for years, especially in long term agreements, and these relationships can be especially difficult to maneuver.

What factors give rise to making this decision? First, the foundation of a good partnership is effective, frequent communication. If you continually feel out of the loop, despite making your wishes to remain informed known to your tenant, then it’s a good sign that a change is in order.

While it’s a two way street, Kansas State University ag economist Kevin Dhuyetter, who runs farm workshops on landowner/tenant ethics, finds that landowners are often less privy to information than the tenant, and are easy to take advantage of as a result. “Based on my experiences, the typical landowner in Kansas is a landowner by inheritance. If you are a landowner by inheritance, as opposed to buying the land as an investment, you can be relatively easy to take advantage of, depending on the situation,” he says.

While this isn’t always the case, many landowners are generations and geographically removed from their land, and their access to the information necessary to make informed decisions in lease agreements is compromised. Having a tenant who is willing to be above board and communicate the necessary information with the landowner is necessary for a healthy business relationship. If this is not occurring, then you may need to consider a change.

Another situation Dhuyvetter encounters is when the cash rental rate in a long-time landowner/tenant relationship hasn’t changed in years. The landowner desires to raise the rate, but is uncomfortable asking the tenant, and decides to sell the land, rather than face the confrontation. This situation should be avoided at all costs. Retaining the land if desired and working out a cash rental agreement based on current market value is best for everyone.

These situations can be uncomfortable for many landowners, and that is why so many turn to land managers to act on their behalf. A good land manager can serve as an impartial liaison between landowner and tenant, ensure healthy communication between the two parties, and assist with working out lease agreements that serve the interests of everyone. If the situation necessitates, they can also help landowners change tenants.

Are you a landowner wondering if your land rental agreement is healthy? Are you in need of expert advice in working out rental agreements or in negotiating with your tenant? Let the land managers at UFARM offer you a hand.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s.

 

Sources:

Arens, Curt. “Landlords and Tenants: Building Trust.” Dakota Farmer. FarmProgress.com. 17 Dec. 2013. Web. 21 Jul. 2014.

Fee, Rich. “Land Rental Ethics.” Agriculture.com. 20 Mar. 2012. Web. 21 Jul. 2014.

 

,

How Will 2014 Crop Input Costs Affect The Bottom Line?

input costsAs farmers reach their last rounds in the combine harvesting 2013’s crop, most are already thinking ahead to 2014. One of their top concerns is input costs and how best to manage them to maximize their bottom line.

The drought of 2012 and its resultant high-demand and low supply of crops led to high commodity prices, but with some drought-relief in major corn and soybean areas of the country in 2013, it is expected that commodity prices will adjust to reflect a better grain supply. With grain prices on the general decline, farmers expect to contend with potentially tight profit margins in the coming harvest year. As a result, analysts expect changes in the money they pay for 2014 input costs such as fertilizer, fuel, chemicals, and seed.

On the whole, fertilizer costs have declined. In particular, potash and phosphate are down 15-17% since last spring, and nitrogen has declined 22% this fall. Depending on how much the weather will allow farmers to get their fertilizers applied this fall will further determine the price of fertilizers next spring. The decrease in the price of nitrogen reflects potential lower corn acres in 2014, as well as an increase in domestic production of nitrogen.

Likewise, fuel costs are expected to be down slightly in 2014. The price of the diesel fuel that runs most farm machinery is expected to be down by 4%. Similarly, the price of natural gas, which is commonly used to dry corn, is projected to be down by 4% as well.

The price of chemicals—in the form of herbicides, insecticides and fungicides—will be mixed. Purdue University farm business management specialist Alan Miller contends that chemical prices will be up slightly, with a 1% increase, with the exception of herbicides, which will remain flat. Experts urge farmers to try to buy chemicals in bulk when possible in order to cut costs. Another way to cut input costs is to consider purchasing seed and chemical package deals when making seed-buying decisions.

Seed prices are predicted to be up in 2014, perhaps as much as 2-3% for the 2014 planting season. However, while producers always attempt to watch their pricing inputs, they will not cut corners when it comes to selecting the type of seed they choose to grow. With the technology that goes into seed genetics and the beneficial ways these hybrids can maximize yields and overall profits, farmers realize that it is in their best interest to choose the right type of seed for their ground, regardless of cost.

Finally, experts predict land and rent prices to remain where they are in 2014. Machinery costs, which have increased an average of 7% per year from 2002-2012, could fall as a result of lower commodity prices, especially if these lower prices are sustained for a longer period of time.

While it is impossible to predict yields and prices for the 2014 growing season, it is necessary for farmers to make input decisions now in order to maximize profit and lower risk where possible.

If you have questions about how input costs will affect the profitability of your land or operation, please contact one of the professional farm managers at UFARM for a free consultation.