Category: Marketing (page 2 of 20)

Russia Set to Be World’s Biggest Wheat Exporter… What Comes Next?

Russia is not only expected to harvest a bumper crop for the third year in a row this season, but they are also expected to overtake the EU to become the world’s largest wheat exporter. Many insiders are saying this will continue to spark fierce competition globally. Point being, since July 1, Russia has already supplied wheat to Mexico, which is usually dominated by the U.S., and booked private sales to Algeria and Morocco, traditionally France’s market. It has also shipped wheat to Mali, Malta and Myanmar for the first time in an very long period. I’m also hearing that Russia has met standards for Indonesia, generally the largest buyer of Australian wheat. The USDA expects Russia to export 30 million metric tons in the 2016/17 season, which would allow it to beat EU exports of 27 million metric tons and become the world’s largest wheat exporter. We also have to keep in mind that we are seeing a lot more competition from Kazakhstan and Ukraine as well. Bottom-line, the back-to-back big crops and devalued ruble have propelled Russia to becoming the top global exporter. There’s fear amongst the bulls that a stronger U.S. dollar could continue to give the Russian and Black Sea exporters a decisive edge over American suppliers. With a much larger than expected winter wheat crop recently harvested here in the U.S. and storage overflowing, we can’t afford to lose any business to our neighboring nations. As a producer we have to continue to keep a close eye on the U.S. dollar and perhaps the U.S. presidential polls. There’s some fear circulating that a Trump victory could create a bevy of trade wars, hence a possible boycott of some important U.S. ag exports. Again, there’s lots of moving parts, but Russia has clearly moved atop the global export leaderboard.

RussiaTopWheatExporter-01

Farmland Prices Taking A Few Steps Back

The USDA recently released its latest figures on farmland values. For most areas the average price per acre of farmland has dropped in comparison to last year. Obviously there are many variables in play when talking about farmland prices, just make certain you understand these are broad assumptions and may not best represent what is happening in your own hometown. The August 5th report shows that in 2016, the average price per acre is now $3,010, down -$10 from last year. If we breakdown the numbers a bit, the Corn Belt saw average farm real estate values down across most states, with the overall per acre price dropping to $6,290 in 2016, down form $6,350 in 2015. In Iowa, the average price per acre is $7,850, which represents a -1.9% drop form 2015. In Illinois, the average price per acre is $7,400, a -1.3% decrease from 2015. Indiana remains unchanged at $7,150 per acre. Ohio’s average price per acre of farmland is $5,700. That’s down -0.9% form 2015. Missouri was one of the only states around the Corn Belt to experience increases in land values. Its average price per acre is $3,400, which is up +1.5% form 2015. The state that experienced the largest increase is Oklahoma. According to the report, farmland is valued at $1,800 per acre, a +5.9% increase form 2015. Washington also experienced a +5.6 per cent increase form 2015 to $2,800 per acre. The large decrease in value happened in Kansas. The current value is about $1,880 per acre, a +7.4% drop form 2015. If I may, we have watched as farm incomes have dropped since 2013, but until now, land values had so far held out even as crop prices tumbled. Now, the trend in land prices is likely to be similar to the 1980s, when values fell for three years. Of course, it likely won’t drop to that degree, but the decline is likely to continue for at least another year or so, especially if row-crop prices remain at or below break-even levels. Farmers and investors have largely come to terms with the fact that days of massive annual gains has cycled past and it might be a while before we see another round of significant gains. To see more specifics please visit the USDA, NASS site and the following link “Land Values 2016 Summary” August 2016) Click picture below to view larger version

2016 Farm Real Estate Values-03 copy

USDA Supply and Demand Friday, August 12, 2016

USDA 8/12

Avg. Trade Est.

Trade Range

USDA July

Corn Prod.

15.153

14.757

14.580 – 15.146

14.540

Corn Yield

175.1

170.6

168.6 – 175.0

168

Soybeans Prod.

4.060

3.941

3.865 – 4.054

3.880

Soybean Yield

48.9

47.5

46.7 – 48.8

46.7

U.S. Ending Stocks 2015/16

 

USDA 8/12

Avg. Trade Est.

Trade Range

USDA July

Corn
1.706

1.716

1.676 – 1.829

1.701

Soybeans

0.255

0.320

0.254 – 0.355

0.350

U.S. Ending Stocks 2016/17

 

USDA 8/12

Avg. Trade Est.

Trade Range

USDA July

Corn
2.409
2.255 1.967 – 2.653 2.081
Soybeans
.330
0.316 0.268 – 0.403 0.290
Wheat
1.100
1.114 1.082 – 1.210 1.105

World Ending Stocks 2015/16

  USDA 8/12 Avg. Trade Est. Trade Range USDA July
Corn
209.34
206.57 204.00 – 209.50 206.90
Soybeans
73.00
71.74 70.10 – 74.10 72.17
Wheat
241.88
245.07 241.42 – 251.00 244.52

World Ending Stocks 2016/17

  USDA 8/12 Avg. Trade Est. Trade Range USDA July
Corn
220.81
212.69 201.20 – 228.71 208.39
Soybeans
71.24
67.62 64.51 – 70.80 67.10
Wheat
252.82
251.63 244.25 – 255.30 253.70

U.S. Wheat Production

  USDA 8/12 Avg. Trade Est. Trade Range USDA July
All Wheat
2.321
2.270 2.231 – 2.360 2.261
All Winter
1.698
1.630 1.589 – 1.671 1.628
Hard Red Winter
1.048
1.033 0.993 – 1.049 1.034
Soft Red Winter
0.372
0.371 0.365 – 0.376 0.370
White Winter
0.278
0.224 0.220 – 0.244 0.224
Spring Wheat
0.531

 

0.547 0.525 – 0.576 0.550
Durum
0.092

 

0.086

0.080 – 0.094

0.083

Ag Credit Conditions Deteriorate Further

The Federal Reserve Bank of Kansas City released yesterday their most recent “Ag Credit Survey” by By Nathan Kauffman, Assistant Vice President and Omaha Branch Executive and Matt Clark, Assistant Economist.Below are just a few of the  highlights. I encourage everyone to click the link above and read in full-detail:

  • Repayment rates for farm loans softened again and bankers reported a modest increase in both loan repayment problems and the number of loan applications that were denied. In 2016, more than 7 percent of farm loans had major or severe repayment problems, a relatively large increase from the 2011-13 average of less than 3 percent. The share of farm loans with at least minor repayment problems was approximately 22 percent in the second quarter, and has trended up since 2014. Evidence of repayment problems also has surfaced at the state level. The share of farm loans with identified repayment problems has increased to at least 18 percent in all states. In the Mountain States, more than 30 percent of farm loans had some type of repayment problem, a jump of 17 percentage points from the 2011-13 average.
  • More Loans Being Denied…In response to a weakening farm economy and increased problems with loan repayments, bankers reported an increase in the share of loan applications that were denied in the second quarter. In 2016, almost 15 percent of bankers reported that they denied more than 10 percent of applications for farm operating loans. Borrowers without sufficient liquidity, substantial net worth or large borrowing bases may find it increasingly more difficult to attain financing if their creditworthiness continues to decline. Moderating farmland values may also add pressure to borrowers and banks that rely on highly leveraged farmland as collateral. 
  • Farm income in the quarter continued to tighten. Nearly 75 percent of surveyed bankers reported farm income was less than a year ago. Respondents also noted that agricultural producers continued to reduce capital and household spending as profit margins generally remained weak.  

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Comparing The Record Yielding Year of 2014 to Today

I wanted to see the difference between crop conditions in each state during 2014, the year that produced the record yield of 171 bushels per acre, compared to the conditions currently in play. I had the office do some research and the graphic they came up with below seems to best explain it. States in “green” are doing better this year at the end of July than the same state at the end of July back in 2014. If the state is colored “red” it’s because the crop conditions are worse today than they were back in 2014. I was surprised by a couple of states, I didn’t think they were this much worse off. Perhaps the yield isn’t as big as some of the inside sources are wanting to forecast???

CompareConditionRatingsCorn-04

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