Demand and Farmland Values - Friday, 16 December 2016

Export numbers for soybeans remain strong with loadings totaling 67.5 million bushels above previous estimates and ahead of the volume needed to meet the yearly projection. Corn, however failed to the reach either the volume needed or the trade estimates for corn exports.

The debate continues over what the actual yearend carryout for corn will be especially for our domestic corn supply. There are those in the trade that believe that corn exports are projected 125 million bushels too high but there are also those that feel the estimated demand for ethanol is equally underestimated.  Corn used for feed estimates are thought to be over-estimated by around 350 million bushels due to inconsistent cattle numbers and a large supply of alternative feed grains available.  Global supplies of corn are the largest concern at this point though. A forecasted increase of 9.5 million metric tons is anticipated with the bulk of the increase coming from the two countries of China and Brazil who are expected to produce an additional 6.5 million metric tons.  This will bring additional competition to U.S. exports in the global marketplace.

We have seen the average value of Iowa farmland decline for the 3rd year in a row for the first time since the farm crisis of the 1980’s according to an Iowa State Land Value Survey conducted in November.  Historic land values were reached in 2013 and now in 2016 the statewide average is approximately $7,183/acre or a decrease of 17.5% from its high 3 years ago.  Dr. Wendong, an Assistant Professor of Economics at Iowa State University was quoted, “If you are a pessimist, there certainly are reasons to worry, especially for landowners and producers who are over-leveraged.  However, for an optimist, the decline is still modest, and the probability of a replay of the 1980’s farm crisis is low.”  75% of the producers that participated in the survey in 2015 indicated they believed that farmland values would continue to decline in 2016, in this year’s survey producers are looking for a rebound in the farm economy in 3 to 4 years.

 

Iowa State University, Climatologist, Elwynn Taylor spoke to a large crowd at the Farm News Ag Show held at Iowa Central Community College in Fort Dodge last week.  He is well known for his expertise in weather patterns and crop yields and according to Taylor the current outlook for 2017 yields is just above trend but updated forecasts that will become available later in January and again in April will help paint a much clearer picture for the growing season. 

Elwynn expressed his concerns regarding his expectations for coming years.  “All our major droughts have started in north Georgia and South Carolina, they are in drought right now.  If that is still continuing in January then that drought will probably expand this summer into Ohio and perhaps along the Gulf Coast.  Often in the first year it reaches Ohio, sometimes it reaches Texas and in the second year it reaches here.”  Taylor watches a number of different weather developments around the globe as he develops his outlooks.  One of those are the prevailing winds which typically shift from the northwest in winter to come from the south around March 13.  “That is because of the Bermuda high pressure and the clockwise flow of air around that high pressure.  In the big drought of 1988, the Bermuda high pressure system wasn’t over Bermuda on schedule, instead it lingered over by Africa.  Finally in July it got there, and from July on through the rest of the year we had a pretty normal season, of course the corn was dead by then.” 

Taylor expects that “The climate risk in agriculture is going to be higher in the next 20 years like it was I the ‘80s.” He added, “The new hybrids we have today are not independent of the weather.  The weather we had I the 1930’s that cut yields in half, would still cut yields in half today…For all our improvements we are still dependent on the weather.”

Temps from -25 to -35 degrees below normal are forecasted for the weekend bringing us our coldest December air in years and it appears as though the stratospheric polar vortex is playing a role.  In addition to the bitter cold, a wintry precipitation will stretch across the northern tier of the U.S. bringing impressive snow totals to many areas. 

 

The latest outlook for January through March from the National Weather Service is shown in the maps below.

 

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