On Friday, the USDA confirmed what many farmers have been experiencing first hand this fall – crop yields in many areas are not going to be as robust as previously expected. The USDA’s updated prediction lowered their September prediction for corn production nearly 4% and their soybean production over 2%. The result from these revised predictions was a rally in the futures markets, with corn and soybean prices both soaring. With worldwide demand continuing to grow and depleting existing stocks, and a lower than anticipated yields across the Midwest, we could very likely continue to see the futures markets remain bullish for the foreseeable future. We in the farm real estate industry will continue to monitor how higher commodities prices will affect the farmland market. In areas where yields are not being affected, and with farmers being able to take advantage of higher prices, it could very well translate into an active farmland Market. To read more regarding the latest USDA crop prediction, head over to Bloomberg (Corn, Soybeans, Wheat surge by Exchange Limits as U.S. Cuts Supply Outlook)
Posts Tagged ‘USDA’
Lower Yields Lead To Rally in Markets
Sunday, October 10th, 2010USDA August Crop Report
Thursday, August 12th, 2010Earlier 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).
