Farmland Buying Season Upon Us
Farmers have had plenty of time to complete scheduled fall field work as winter has been slow to arrive in much of the Corn Belt. Snow forecasts were mild as farmers were completing fall tillage and fertilizer application throughout the month post harvest.
Markets were again stressed during November due to the European debt crisis and dangerously high bond prices in select EU nations. Global demand for commodities slowed along with commercial and fund selling on outside market influence.
Grain Prices
Corn prices decreased by 7.65% in November and closed at $6.01 per bushel due to decreased global demand and domestic feed use. The USDA lowered the average 2011 U.S. corn yield to an 8-year low of 146.7 bushels per acre. The Chinese, who have been increasingly purchasing U.S. corn, will continue to likely provide a price floor for U.S. corn by triggering additional strategic buying. Although corn prices have been on a downward trend in the last few months, the long-term outlook is still fundamentally bullish on decreasing supplies and increasing global demand.
Soybean prices decreased 6.72% this month to $11.31 per bushel on the Chicago Board of Trade. The USDA estimated that U.S. production decreased by an additional 14 million bushels to 3.046 billion bushels and U.S. exports were decreased by 50 million bushels, sending ending stocks up 21.5%. Favorable weather in South America for soybean planting has also supported a bullish short-term outlook on soybean prices. We will continue to track the affects of La Niña in South America as historically low amounts of precipitation have been the outcome of a La Niña growing season for soybeans.
Wheat prices were sent 5.55% lower during November to $5.95 per bushel due to increased world production and increased Russian exports. Global wheat supplies increased by 2.6 million metric tons, according to the USDA, due to higher production in Kazakhstan and EU-27. In late November, Japan's agriculture ministry announced that Japan may import less wheat moving forward due to elevated supplies from past imports.
Farmland Values
During the third quarter of 2011, farmland values in the 7th Federal Reserve District rose 25% year-over-year according to the Federal Reserve Bank of Chicago’s third quarter survey of Farmland Values and Credit Conditions Report. The value of "good" farmland increased 7% in the third quarter compared to the second quarter of 2011, the largest increase since the late 1970's. All District states posted higher year-over-year increases in farmland values and the largest year-over-year land value increases came from Indiana and Iowa at 29% and 31%.
The Creighton University farmland price index rose to 75.4 in November from 66.9 in October and is at its highest level since April 2011. This marks the 22nd straight month the index has been above growth neutral. The farm equipment sales index increased to 68.4 from October's 63.1, signaling strong farmer spending on equipment.
The outlook for farmland values in the fourth quarter are promising as 216 bankers who responded to the October 1st survey believe values will rise through the end of 2011. 39% of the survey respondents anticipate an increase in farmland values from October through December 2011 and only 2% anticipate a decrease.
Understanding DDGS
Ethanol production and its subsidies have recently been highlighted in the media as over 35% of the entire U.S. corn crop is devoted to ethanol production and the agriculture sector has been a target of proposed budget cuts. We want to bring light to ethanol production, and specifically its DDGS (Dried Distillers Grains with Solubles). When corn is processed at an ethanol plant, ethanol is not the only product; 1/3 of the corn gets recycled into a rich and nutritious feed for livestock, which is called DDGS.
Ethanol at its basic form is an alcohol, the same type found in beverages. It is also used in pharmaceuticals, paints, lacquers, food, personal care products, and cleaning products. To produce ethanol, only the starch is used from corn and grain sorghum. The remaining nutrients of protein, fiber, and oil are by-products called DDGS and are used as livestock feed. Ethanol plants make up 98% of DDGS production in North America and the other 2% come from the alcoholic beverage industry.
Due to its high nutritional value, one metric ton of DDGS can replace 1.22 metric tons of feed consisting of corn and soybean meal. In one bushel of corn used for ethanol production, 32% of it comes out as DDGS, but that amount equates to a 39% nutrient output due to the DDGS high concentration.
Countries such as China, Mexico, and Canada have an increasing demand for DDGS due to the high nutrient content. The U.S. exports of DDGS stand year-to-date at 5.25 million metric tons, and is on pace to ship almost 8 million metric tons by the end of 2011, according to Ethanol Producer Magazine.
Outlook
The traditional farmland buying season is upon us and we continue to observe very strong land sales across the entire Midwest. In early November, the 7th Federal Reserve District of Chicago held a conference on farmland values which revealed that there is currently no sign of a farmland bubble present in farmland as bankers are very strict on lending for farmland acquisitions. Farmers have historically comprised the majority of farmland purchasers and today it is no different as over 70% of all farmland buyers in Iowa are farmers.
- Colvin
Markets were again stressed during November due to the European debt crisis and dangerously high bond prices in select EU nations. Global demand for commodities slowed along with commercial and fund selling on outside market influence.
Grain Prices
Corn prices decreased by 7.65% in November and closed at $6.01 per bushel due to decreased global demand and domestic feed use. The USDA lowered the average 2011 U.S. corn yield to an 8-year low of 146.7 bushels per acre. The Chinese, who have been increasingly purchasing U.S. corn, will continue to likely provide a price floor for U.S. corn by triggering additional strategic buying. Although corn prices have been on a downward trend in the last few months, the long-term outlook is still fundamentally bullish on decreasing supplies and increasing global demand.
Soybean prices decreased 6.72% this month to $11.31 per bushel on the Chicago Board of Trade. The USDA estimated that U.S. production decreased by an additional 14 million bushels to 3.046 billion bushels and U.S. exports were decreased by 50 million bushels, sending ending stocks up 21.5%. Favorable weather in South America for soybean planting has also supported a bullish short-term outlook on soybean prices. We will continue to track the affects of La Niña in South America as historically low amounts of precipitation have been the outcome of a La Niña growing season for soybeans.
Wheat prices were sent 5.55% lower during November to $5.95 per bushel due to increased world production and increased Russian exports. Global wheat supplies increased by 2.6 million metric tons, according to the USDA, due to higher production in Kazakhstan and EU-27. In late November, Japan's agriculture ministry announced that Japan may import less wheat moving forward due to elevated supplies from past imports.
Farmland Values
During the third quarter of 2011, farmland values in the 7th Federal Reserve District rose 25% year-over-year according to the Federal Reserve Bank of Chicago’s third quarter survey of Farmland Values and Credit Conditions Report. The value of "good" farmland increased 7% in the third quarter compared to the second quarter of 2011, the largest increase since the late 1970's. All District states posted higher year-over-year increases in farmland values and the largest year-over-year land value increases came from Indiana and Iowa at 29% and 31%.
The Creighton University farmland price index rose to 75.4 in November from 66.9 in October and is at its highest level since April 2011. This marks the 22nd straight month the index has been above growth neutral. The farm equipment sales index increased to 68.4 from October's 63.1, signaling strong farmer spending on equipment.
The outlook for farmland values in the fourth quarter are promising as 216 bankers who responded to the October 1st survey believe values will rise through the end of 2011. 39% of the survey respondents anticipate an increase in farmland values from October through December 2011 and only 2% anticipate a decrease.
Understanding DDGS
Ethanol production and its subsidies have recently been highlighted in the media as over 35% of the entire U.S. corn crop is devoted to ethanol production and the agriculture sector has been a target of proposed budget cuts. We want to bring light to ethanol production, and specifically its DDGS (Dried Distillers Grains with Solubles). When corn is processed at an ethanol plant, ethanol is not the only product; 1/3 of the corn gets recycled into a rich and nutritious feed for livestock, which is called DDGS.
Ethanol at its basic form is an alcohol, the same type found in beverages. It is also used in pharmaceuticals, paints, lacquers, food, personal care products, and cleaning products. To produce ethanol, only the starch is used from corn and grain sorghum. The remaining nutrients of protein, fiber, and oil are by-products called DDGS and are used as livestock feed. Ethanol plants make up 98% of DDGS production in North America and the other 2% come from the alcoholic beverage industry.
Due to its high nutritional value, one metric ton of DDGS can replace 1.22 metric tons of feed consisting of corn and soybean meal. In one bushel of corn used for ethanol production, 32% of it comes out as DDGS, but that amount equates to a 39% nutrient output due to the DDGS high concentration.
Countries such as China, Mexico, and Canada have an increasing demand for DDGS due to the high nutrient content. The U.S. exports of DDGS stand year-to-date at 5.25 million metric tons, and is on pace to ship almost 8 million metric tons by the end of 2011, according to Ethanol Producer Magazine.
Outlook
The traditional farmland buying season is upon us and we continue to observe very strong land sales across the entire Midwest. In early November, the 7th Federal Reserve District of Chicago held a conference on farmland values which revealed that there is currently no sign of a farmland bubble present in farmland as bankers are very strict on lending for farmland acquisitions. Farmers have historically comprised the majority of farmland purchasers and today it is no different as over 70% of all farmland buyers in Iowa are farmers.
- Colvin
Posted by Colvin & Co. at 12/1/2011 8:30 AM 
Categories: Farmland
Tags: agriculture farmland corn commodities farming soybeans USDA wheat Weather food china exports Land Value
Categories: Farmland
Tags: agriculture farmland corn commodities farming soybeans USDA wheat Weather food china exports Land Value
Great concise information
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