Corn Supply

As harvest moves along, I saw another interesting article about food prices based on a corn surplus. There was some controversy last year due to rising food prices due to rising corn prices due to the rising use of corn for fuel. A new article from Christopher Leonard with The Associated Press seems to show that a surplus of corn this year may lead to a much slower increase in food prices; even while corn prices are still relatively high. Here is the article, which was published in the St. Paul Pioneer Press:

"ST. LOUIS - Food prices could rise more slowly next year because farmers have a bigger surplus of corn on hand than previously thought.

The Department of Agriculture estimated today that farmers have 206 million more bushels of surplus corn on hand at the start of this year's harvest. That means farmers will have 866 million bushels of corn on hand at the end of next summer, which is higher than last month's forecast of 672 million bushels.

The price corn fell 15 cents, or 2 percent, in morning trading to $6.30 a bushel. In June, corn hit a record high of $7.99 a bushel after supply levels had thinned.

The USDA also increased its estimate of next year's wheat surplus by 10 percent to 837 million bushels. In response, the price of wheat dropped 5 percent to $6.25 a bushel.

Corn is an ingredient in everything from animal feed to cereal to soft drinks. So cheaper corn could ease broader food prices. It takes about six months for higher corn prices to reach the supermarket shelves. That's because there's a long lead time between when meat companies and food processors buy their grain, and when products hit stores.

For all of 2011, the USDA predicts food prices will rise 3 percent to 4 percent. Food price are expected to increase more slowly next year, between 2.5 percent and 3.5 percent, according to the USDA estimate last month.

One reason prices will continue to rise is corn supplies remain tight, even with the larger-than-expected surplus. The 866 million bushels of corn left over at the end of next year would satisfy demand for about 25 days. That's below the 30-day supply that most investors consider healthy.
Just four months ago, analysts were predicting that corn could trade above $8.50 a bushel because of strong demand from ethanol plants and hog and chicken farmers.

In light of the USDA's new estimates, corn will likely hover closer to $6 a bushel, said Jason Ward, an analyst with Northstar Commodity in Minneapolis.

Expensive corn prompted farmers this spring to plant the second-largest corn crop since World War II. It appears that the bigger harvest will be enough to avoid a major food shortage this year."

If corn prices stay relatively high, the value of farmland will likely stay high as well. If you're interested in seeing the market value of your land, we can help you with a farmland appraisal. Please contact me at 320-894-7528 for more information. I'll be in my tractor...

Thanks,
Noah Hultgren
The FarmlandMan
naoh@farmlandman.com

Fast Harvest

This dry, unseasonably warm weather has led to a really fast harvest so far. At Hultgren Farms, we're pretty much already done with soybeans and navy beans; but progress has been a bit slower for sugar beets. Most days it's actually been too hot to harvest beets, but hopefully things will pick up in the next couple of days if the weather cooperates. We got a nice rain this weekend - not quite a half inch, but it'll do.

I saw an article in the West Central Tribune talking about local progress in the harvest. The article, written by Gretchen Schlosser, included a couple quotes from Wes Nelson, who is the executive director of the Farm Service Agency in Kandiyohi County. He said that "Yield reports on the early planted soybeans are in the 40- to 45-bushel range." Other areas to the west are reporting slightly lower yields.

Larry Konsterlie, my friend and colleague on the Kandiyohi County Corn Growers Association, also got quoted in the article. Like me, he's guessing this year will not match last year's success. "“We aren’t going to have the binbuster we had last year,” Konsterlie said. “Considering the year we had, I’ll take it.” The article goes on to say that "Konsterlie has not begun to harvest corn but has heard reports of 150- to 200-bushel yields, with the moisture content of the corn crop dropping daily with the warm temperatures and windy weather."

Finally, the article talks briefly about the sugar beet harvest. Because of the late start we got this spring, we've seen that the beets are going to be smaller than normal. According to Schlosser's article, "sugar beet yields are also variable, with producers reporting good yields from some fields, but also fields yielding less than 10 tons of beets per acre. Because planting was delayed by the wet spring, it will likely be a very disappointing year overall for the beet crop, Nelson said."

I hope that the weather cools down so that we can start the harvest. If yields remain average or above average, farm land values will at least hold steady or continue increasing. If you are interested in selling some farm land to make the most of a good ag market, please call me at 320-894-7528.

Have a good week!
Noah Hultgren
noah@farmlandman.com
320-894-7528

Grains Council newsletter

I was recently interviewed for an article for the U.S Grains Council, written by Mike Howie.

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Corn crop may surpass last year’s production
Corn harvest is underway in some parts of the United States, but most of the Corn Belt where the bulk of the U.S. corn crop is grown, won’t see harvest gearing up for several more weeks.

In the mean time, the U.S. Department of Agriculture provided an early estimate of the 2011-12 corn crop, as have various analysts and those on crop tours across the Midwestern United States. In its August report, USDA forecast U.S. corn production at 328 million tons (12.9 billion bushels), which if realized is 4 percent larger than last year’s crop and the third largest on record.

“While many of us have faced extreme drought or severe flooding, we have persevered and, through the use of improved technologies and practices, we will nearly reach the crop record set under more favorable conditions,” said Bart Schott, a farmer from North Dakota who is president of the National Corn Growers Association.

U.S. corn yields were estimated at 9.61 tons per hectare (153 bushels per acre), which was smaller than some had anticipated but crop tours throughout the Midwest support the smaller number. In fact, some growers wonder if that figure will fall a bit heading into harvest.

“Cold and wet weather kept us from getting the corn crop planted in the upper Midwest this spring, but warm weather this summer allowed it to catch up to where it should be this time of year,” said Noah Hultgren, a farmer from Willmar, Minnesota.

“We did have some heat stress but right now the crop looks pretty good, although I’m not sure if we’ll reach USDA’s yield estimate for the state. It just depends on how we finish out with grain fill and dry down,” he said. Average yields in Minnesota were estimated at 10 tons per hectare (166 bushels per acre) by USDA.

Crop analysts and others, including a delegation from China, on a crop tour across the main U.S. growing areas provided a mixed bag of numbers. There were areas across the Midwest with the potential for very good yields and areas where yields were likely going to be below expectations. A solid production estimate may be difficult to come by until harvest is fully underway.

“Over the last several years there has been discussion on and off about U.S. and global corn supplies, but in the end there has been plenty of corn to meet demand,” Hultgren said. “I’ve no doubt this year that there will again be plenty of corn to go around, although obviously prices have moved upward.”

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It's fun to share my opinion with respected writers on the current crop. I'd love to share my opinion with you about farm land values, real estate appraisals, and 1031 tax-deferred exchanges as well. Please let me know if there is anything I can provide to you.

Thanks,
Noah Hultgren
Farmlandman.com
320-894-7528