January 22, 2018

Bad Weather Rising

An agricultural economist at the University of Illinois is looking for a long-term recovery in the commodity markets. Commodity prices have been low since 2014, but the price of farmland has remained fairly strong. This is an indication thinks University of Illinois’ Scott Irwin that those buying farmland believe his contrarian view that prices will recover say to $4.00 for corn, $10.75 for soybeans, and $4.75 for all wheat. That’s at least one way to reconcile the firmness of land values. These long-run investors, whether they be farmers or outside investors, are looking for higher averages to restore profitability.

Irwin says there are two reasons for commodity prices to increase. One of them is slow. It’s the return of better economic conditions across the planet. The other he says is fast and violent, “I think it will be a series, in a fairly short period of time, of really poor weather that will be the big event that pulls us out.”

The ag economist is looking for the return of a more normal frequency of bad weather in the United States. Noting that the last twenty-plus years have been the best series in terms of corn belt weather since 1895.

January 20, 2018

‚ÄčIt is dry in the United States from Texas to Illinois.

It is dry in the United States from Texas to Illinois.
Frankly, that’s not a big deal right now or a marketing plan. It could become something later on in the year, but the odds don’t really correlate in any fashion. Here is proof from the USDA NASS National Average Yield database. What you see is the average national corn yield for each year since 2010 imposed on a January Drought Monitor map. The U.S. Drought Monitor is produced through a partnership between the National Drought Mitigation Center at the University of Nebraska-Lincoln, the United States Department of Agriculture, and the National Oceanic and Atmospheric Administration.

Spring rains, more often than not, alleviate dry conditions. You may view the National Average Corn Yield database going back to 1866 (24.3 bpa) using this link. Here’s a quick view of the National Average Yields database for corn going back to 2002.

January 19, 2018

Women Wanting to Learn More About Running the Farm

Annie’s Project

Women involved in agriculture and wanting to learn more about managing risk on the farm can sign up for Annie’s Project classes this winter. Annie’s Project was originated by Ruth Hambleton before she retired from Illinois Extension.

Annie’s Project – Education for Farm Women is a 501(c)(3) nonprofit organization dedicated to providing educational programs (Annie’s Projects) designed to strengthen women’s roles in the modern farm enterprise. Currently, classes are being taught in 33 states. Annie’s Projects foster problem solving, record keeping, and decision-making skills in farm women.
The six educational sessions of the course include topics from the five risk areas. As Annie’s Project has been localized to meet the needs of farm and ranch women across the country, topics or emphases may vary.
  • Financial Risk – women and money, basic financial documentation, interpreting financial statements, enterprise analysis, USDA programs, and record keeping systems
  • Human Resource Risk – communication and management styles, insurance needs, and succession planning
  • Legal Risk – estate planning, farmland leasing, and employee management
  • Market Risk – access to market information and grain or livestock marketing
  • Production Risk – Natural Resources Conservation Service, web soil survey, and crop insurance

January 16, 2018

Returning to the New Era Corn Price Mid-Point

The agricultural economists at ILLINOIS believe there are three recent historical commodity price eras. For grain prices, these run from post World War II to 1973, from 1973 to 2006, and from 2006 to the present. What they’ve found to date is that grain prices, unadjusted for inflation, tend to move within a range during these eras.

The current range for corn is something like $3 dollars per bushel on the low end and $8.00 on the high. The highs come less frequently, usually driven by a weather-related shortfall. Consequently, prices spend more time on the lower end of the range than the top end. However, he doesn’t really know why the prices are so range-bound, “My own personal view is that it reflects relatively stable supply and demand dynamics. These are food commodity markets that don’t change very rapidly in terms of who’s producing and who’s consuming. As long as economic growth is not wildly high or low, we’ll tend to bounce around in a range.”

The mid-point of that range in Illinois since 2006 has been about $4.50 for corn. However, Irwin says corn prices over the last four years have averaged about $3.50 per bushel. He thinks this means corn prices are due to go higher. Marketing on that belief is difficult says Scott Irwin, “If you believe conventional wisdom, you should prepare for and project sub $3.50 corn prices for as far as the eye can see. This is not my view. I will be the first to admit prices have gone lower, longer than I expected when we came off the highs, but I still believe a projected average price over the next five years closer to $4.00, rather than $3.25 or $3.50 is more realistic.”

Admittedly, Irwin has more confidence in his ability to predict the mid-point than the movement of prices. Mostly he says the upward moves are predicated on weather problems.

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