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BRIAN HOOPS

By Staff | Sep 19, 2014

David Fullington paid a “ridiculous” price of $13,600 an acre for a 200-acre farm in Illinois within the last year and says he and his partners would probably bid again for prime land that is in tight supply, despite tumbling grain prices.

“No regrets at all,” Fullington said of the purchase of his neighbor’s land, now farmed by a son of one of the partners.

“Very seldom do you get an opportunity to buy something right next door to you. There’s always a little extra value there for you.”

In the 1980s, sharp falls in corn and soybean prices hit farm incomes hard and land prices tumbled, hurting the rural economy in the world’s biggest grains producer.

The pain spilled into the financial sector as defaults on loans pegged to farmland values rose.

U.S. policymakers and bankers had feared a repeat this year, but instead, U.S. farmland prices are already up 8 percent as of Aug. 1, according to the U.S. Department of Agriculture.

USDA expects values – especially for prime farmland – to hold near record highs even though corn and soybeans are at four-year lows.

The reason? Farming families like the Fullingtons have money from recent boom years to invest into assets they think give long-term value.

Levels of debt are also lower than in the 1980s.

CORN ANALYSIS

Corn closed the week 18.25 cents lower.

Last week, private exporters announced sales of 116,000 metric tons of corn to an unknown destination.

Weekly export sales of corn showed corn sales of 20.7 million bushels.

In the weekly crop progress report, U.S. corn condition was unchanged last week at 74 percent good-to-excellent versus 54 percent last year and 57 percent average.

Dent stage advanced 16 points to 69 percent versus 74 percent average.

This is the sixth best rating since 1986.

In the monthly supply/demand report, the USDA forecast the 2014-15 U.S. corn crop will come in at 14.39 billion bushels on a yield of 171.7 bushels per acre.

That is up from an estimated yield of 167.4 bpa in August.

The yield increase raised corn production by 363 mb. Based on the report info, record yields will be achieved in Iowa (185), Illinois (194), Indiana (184), Missouri (169) and Ohio (179) and seven other states this year.

The 2014/15 U.S. corn ending stock estimate to 2 bb, which includes a 25 mb hike in exports and a 75 mb increase in feed/residual use.

U.S. ethanol use of corn was also raised by 50 mb to help absorb some of the 363 mb increase in supply.

In other record crop years of 1994 and 2004, yields were increased from the September to final report by 10 bpa and 11 bpa, respectively.

A similar yield increase this year is likely based on early harvest results.

Strategy and outlook: Producers are 25 percent sold of the 2014/15 crop and own December puts on 75 percent of the crop. They should exit at $3.05.

SOYBEANS ANALYSIS

Soybeans closed the week 35.5 cents lower.

Last week, private exporters reported sales of 360,000 mt of soybeans to China; 461,000 mt of soybeans to an unknown destination and 360,000 mt of optional origin soybeans to China.

Weekly export sales of soybeans showed sales of 31.9 mb.

In the weekly crop progress report, U.S. soybean condition was stable last week at 72 percent versus 52 percent last year and 56 percent average.

Leaf drop is at 12 percent versus 17 percent last year.

Soybean rating is the third highest since 1986.

The USDA forecast the 2014-15 U.S. soybean crop will come in at 3.913 bb on a yield of 46.6 bpa.

Record soybean yields are being predicted for Illinois, Indiana, Ohio, Missouri and South Dakota.

The production estimate rose by 629 mb from last year’s actual production, and 97 mb above last month’s estimate.

Soybean stocks are estimated at 475 mb, up 45 mb from August as crush was raised and exports were raised by 25 mb.

Soybeans look to find a fall low later this year due to the slow harvest start.

Harvest lows are likely to be scored near $8.75 to $9.30.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production. Producers own puts on 75 percent of the crop. They should exit at $8.75.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment.

Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.

Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

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