Earlier this morning the USDA released their August estimate for 2010 crop production. Both corn and soybean estimates were strong – soybean production (44 bushels per acre) is predicted to be in line with 2009 levels and corn levels are predicted to set new highs (165 bushels per acre). However, even with the anticipated strong yields, the ever increasing worldwide demand is still expected to decrease corn stocks (soybean stocks look to remain unchanged). So, how will this affect the commodities markets? Well…it depends on who you ask and what indicators that they are using as predictors. With the predicted large amounts of grain that should be produced this fall, one would think that this would lead to a drop in the futures markets. However, many believe that the expected decrease in current corn stocks should push prices higher as we approach harvest. At the time of this post, corn, soybeans and wheat were all seeing rallies in the futures markets.
What does this mean for the farmland real estate market? The farmer-buyer’s ability to add acreage is dependent on having the funds to pay for said acreage. The more income that a farmer receives, the more money that he/she will have to reinvest into their operation – whether it be a new tractor, 4 x 4 truck, or the 80 acres that is for sale across the road. As we approach fall and farm sale season begins to ramp up, it will be important to keep an eye on the commodities markets, which will help determine the strength of the farmland market.
Interested in reading more about the USDA August Crop Report? The DTN/Progressive Farmer website has a very informative analysis on their website (USDA Reports Summary).
