Grain Markets Performing Well & Farmland At All Time High

Farmers are anxiously waiting to start the 2012 planting season which typically commences the second week of April, but may arrive early this year. Grain markets performed well this month as global demand for grains continues to increase as proven by strong export data and a weaker U.S. Dollar. Farmland values also continued to increase according to District Federal Reserve Reports.

Corn prices increased by 2.7% in February, with prices following the upward trend of soybeans, even though a record amount of corn is set to be planted this year. USDA projected U.S. corn exports at 50 million bushels higher due to an increase in sales and shipments and a decrease in Argentina’s supplies. Ending U.S. corn stocks were also decreased by 45 million bushels to 801 million bushels, leaving the stocks-to-use ratio at 6.3% compared to the 5-year historical average of 12%.

Soybean prices increased substantially by 9.5% this month to close at $13.13 per bushel, a five-month high. World soybean production was forecasted 7.2% lower for 2012/13, according to World Oil, which would mark the largest year over year decrease in history due to poor South American weather conditions. USDA reported soybean ending stocks and exports unchanged in the U.S. from the January report.

Wheat prices were nearly unchanged in February, losing $0.02 on the front month contract closing at $6.64 per bushel this month. Ample global wheat supplies have kept the wheat markets calm throughout February. U.S. wheat ending stocks for 2011/12 were projected 25 million bushels lower to 845 million bushels in the February USDA report. Exports were increased by 25 million bushels due to strong sales, strong shipments, and competitively priced feed.

Farmland values in the 7th Federal Reserve District in Chicago rose 22%, from January 1, 2011 to January 1, 2012, the largest annual increase since 1976 according to the Federal Reserve Bank of Chicago’s fourth quarter survey of Farmland Values and Credit Conditions Report. The Kansas City Fed reported a similar 25% increase year-over-year. Farmland values soared to record highs due to strong farmer demand.

According to the USDA’s most recent forecasts, 2011 net farm income is anticipated to be $98.1 billion in 2011, a 24% increase from 2010 levels. The farm equipment sales index declined to 63.4 from 72.3 in January. Bankers were asked what their forecast was for farmland prices in the coming year. Almost half, 46%, forecast prices to grow between 1% and 5% while only 8% of bankers expect prices to decline.