WILLAg Notes

May 09, 2016

Summer Weather, El NiƱo, & Corn Yields

The agricultural economists at the land grant university in Illinois have gone through 56 years of weather data to see if there is any connection between the current El Niño event and trend yields for corn.



The trend yield for corn has been going up 1.8 bushels per yer for about 50 years say the number crunchers from the University of Illinois. It means, under normal weather conditions with a little adjustment upward, this year’s corn crop should average 166.2 bushels to the acre nationwide.



The 166.2 is the norm, but it lives within a range that would be indicative of really good years like 2004 and really bad years like 2012 says U of I’s Scott Irwin, “Now what we want to ask is if we should skew our expectations of this risk given this outside factor that doesn’t happen every year that we call El Niño”.

ILLINOIS’ research suggests the answer to this question is a qualified yes. The qualification is that the El Niño event is measured strictly as an effect of water temperature in the Pacific Ocean near the equator and that only the most extreme of these events, those a full degree or more centigrade above the norm for three months running, would be considered strong enough to regularly have a real measurable impact on U.S. crops.

The warmest one, to date, was 1997/98 and it peaked at 2.3 degrees centigrade above normal. If you take the same period and you estimate trend yields going back to 1960 there were 11 El Niño episodes at least one centigrade degree above normal. The Illinois agricultural economists filtered this data so these spikes had to occur in what they called the pre-season periods for corn production. This would be from September to March prior to the crop year. It is exactly what has happened this year and the spike is more than two degrees centigrade. It’s a really big one.

Irwin - What we find is, in these big spiking El Niños that occur in the pre-season period, that corn on average is about 4 to 5 bushels to the acre below trend.

Having said that, Irwin points to a large range of occurrences from 11 bushels above trend in 1992 to 23 bushels below trend in 1982. 1988 and 2012, the two worst drought years, also count under this construct.



The model used very reliably predicts summer heat waves, however, it is not so great at determining the amount of rainfall. Recall the reference Irwin made to the 1997/98 pre-season El Niño, the largest on record, similar to this year. The national corn yield was 3 bushels to the acre above trend. The heat wave came, it was just very last in August and early September after the corn crop had been made.


May 03, 2016

Wheat Quality Council 2016 HRW Tour


Crop scouts moved through Kansas, Oklahoma, and Nebraska this week to check on the condition of the hard red winter wheat crop (HRW). They found it to be a bin buster in the making averaging 48.6 bushels to the acre.


April 29, 2016

Farm Economy Beginning to Show Signs of Stress

This is the third year of a financial crunch on the farm. It follows on the heels of a series of tremendous seasons since 2006. The extra money, from then, is now starting to run out.



The financial stress in the ag sector may really begin to show this fall if low commodity prices persist says the Director of the TIAA CREF Center for Farmland Research on the Univeristy of Illinois campus, Bruce Sherrick.

Quote Summary - It is already affecting cash rents and land prices some. However, on a percentage basis not as much as the current cash prices (would suggest) for delivery within this year at least.

Sherrick says a a couple of things have happened which explain this buffering. The last several years have been really quite good for agricultural incomes. So, farmers have pretty strong balance sheets. It is easier to weather a downturn, says Sherrick, after a few good years, than a bad year after a few bad years, “We are seeing, clearly, working capital crunches beginning to hit people. This is the first year that is material, and lenders are seeing and uptick in volume. As we’ve adjusted to more normal stocks, we are into a period were we think, ”this might be the last year were people can really just stand for what’s going on without making some major changes in how they manage cash rents, or inputs, or financial structures".

This does not mean the price of farm land will plummet. Long term interest rates are very, very low and the rate of turnover in farmland is supper small. Money is cheap and farmland for sale is scarce.

Quote Summary - If you look at the number of acres that sell, maybe around 2% transfer per year within the agriculturally intense states. Only half of that moves outside of a family. The market is thin, and this helps buffer or slow down changes in farmland values because of changes in short term farm income. The low interest rates help people pay for a longterm investment with a stable cash return that can be rented for perhaps 3% of its value on a cash basis.

Farm land doesn’t look like such a dire situation, then, when you step back from it. It also has shown, very reliably says Bruce Sherrick, a positive correlation with inflation. Even if the price of commodities stay relatively low, it may be that the price of farmland, as an owned asset, will help farms stay afloat.


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