September Harvest Off To Strong Start

Harvest is off to another excellent start in September due to relatively warm and dry weather which allowed farmers to already complete 10% of the harvest and start combining soybeans ahead of the five-year historical average. Weather forecasts remain dry for most of the Corn Belt, which will help farmers steadily progress an on-time harvest into October. Additionally, no major frost damaged was reported so far this fall.

The USDA Crop Progress report estimated corn harvest at 23% as of Sunday, September 27. The current harvest progress is 5% behind the five-year average, but 7% ahead of the harvest in 2014, which was delayed due to above average rainfall during the period. Of the five largest corn producing states, Illinois reported the highest harvest progress at 30%, followed by Indiana at 18%, and Nebraska at 10%. Iowa and Minnesota were 9% and 7% respectively and also behind their five-year harvest average. Some farmers in Iowa have been delayed by wet weather, but many farmers in Minnesota have been preoccupied by their soybean harvest and expect to move to strictly corn in early to mid-October.

Soybean harvest progress was estimated at 21% complete by in the USDA Crop Progress report as of Sunday, September 27. The current progress is 5% ahead of the five-year average and 11% ahead of harvest in 2014. Of the five largest soybean producing states, Minnesota reported the most harvest progress at 34%, 14% ahead of their five-year average. Illinois reported the second most progress at 24%, 12% ahead of the five-year average, and Indiana reported the third most at 23%.

The USDA forecasts the U.S. corn crop to average a 167.5 bushel per acre (bpa) yield in 2015, but many farmers are voicing their opinion of lower than expected yields. Actual corn yields will not be fully realized by the markets until harvest is complete, but we are anxiously waiting to learn more real time yield data from local farmers in the upcoming weeks.

Corn and soybean yields across the Corn Belt have differed drastically from east to west. The heavy rains experienced across the eastern Corn Belt through the first half of the growing season caused the USDA crop condition ratings, estimated, and realized yield data to be below average in most areas. Indiana has been the hardest hit where corn and soybean yields are estimated at 158 and 49 bpa respectively for 2015. Indiana's yield estimates are down 20.0% and 9.3% from the average yield reported in 2014, according to Purdue University. The impact of poor weather during the growing season has been less detrimental to the Illinois crop. Yield expectations for Illinois are 172 bpa for corn and 53 bpa for soybeans, 14% and 5% below their levels last year, according to the USDA.

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The western Corn Belt is expected to yield much better, with several farmers believing they may see the greatest yields of the past 10 to 15 years on some properties. The USDA is expecting the state of Iowa to average 183 bpa, a 3% increase from 2014. Farmers in the northern portion of the state have much higher hopes with many targeting to yield 200 bpa or more across their operation. Soybean yields in Iowa are also expected to increase from to 52.0 bpa in 2015 from 51.5 bpa in 2014. Farmers were concerned that lower temperatures and slightly above average rainfall early in the season would impact yield, but all indications point to a record breaking crops for Iowa.

Minnesota’s corn and soybean yield estimates are expected to both be records following a near perfect growing season. The USDA estimated the average corn yield in Minnesota at 184 bpa, a 17% increase from 2014 and a 4% increase from the prior record reported in 2010. Minnesota farmers have said that they have not seen corn this good in 10 to 15 years. Soybean yields are estimated at 48 bpa a 14% increase from 2014 and a 7% increase from the previous record set in 2010. Farmers have been less confident with the expected soybean yield this year, due to the less than perfect planting conditions some operators faced, but early indications are suggesting Minnesota will have a large crop in 2015.

December 2015 corn prices increased 3.5% in September and closed at $3.87 per bushel. Uncertainty in the global financial markets in early September overflowed into commodity markets, causing for a volatile month for corn prices. After falling to its lowest price since October 20th, 2014, the December 2015 corn contract price increased due to bullish weather reports and declining corn conditions reports. On September 11th, the USDA released their Word Agriculture Supply and Demand Estimates (WASDE) report which lowered estimated production by 0.7%, yield by 0.7%, and new crop ending stocks by 7.6%. The news breathed new life into corn prices, increasing 3.5% and recouping the losses of the past nine-weeks. Through the end of the month, corn prices were volatile with pressures from outside markets and poor export data.

The November soybean contract increased 0.8% in September to close at $8.92 per bushel. Soybean prices fell early in the month behind volatility in the global financial markets that spilled over into the commodities sector. Soybeans were further impacted by growing uncertainty over Chinese demand as their economy growth outlook slowed. The market reaction was mixed following the WASDE report mid month when the USDA increased the U.S. average soybean yield by 0.4% and production estimates by 0.5%, causing slight downward pressure, but bullish corn estimates helped soybean prices rebound. Through the end of September, soybean prices were volatile due to the global financial market instability, improving weather, and improving crop condition forecasts, but were more than offset by unexpected positive export demand data.

December wheat prices increased 5.8% throughout September to close at $5.12 per bushel. Wheat prices fell early in September behind poor sales and export report data, and the large global supply continued to weigh heavily on wheat prices. The weakening U.S. dollar caused a slight price rally pushing wheat prices as high as $5.01 mid-month and the USDA Grain Stocks report provided an additional bullish tone at month end with U.S. inventory levels lower than analyst expectations.

The USDA Grain Stocks report released September 30, 2015 reported corn stocks in all positions at 1.73 billion bushels as of September 1, 2015. That is a 41% increase from 2014. Of the current stocks, 593 million bushels were held on-farm, a 28% increase in volume from last year and 34% of the corn stocks. 1.14 billion bushels were held off farm, a 48% increase in volume from last year and 66% of the current corn stocks.

The USDA reported soybean stocks in all positions at 191 million bushels as of September 1st, 2015. That is a 108% increase from 2014. Of the current stocks, 49.7 million bushels were held on-farm, a 133% increase from last year and 26% of current soybean stocks. 142 million bushels were held off-farm, a 101% increase from last year and 74% of the current soybean stocks.

The USDA reported wheat stocks in all positions at 2.09 billion bushels as of September 1st, 2015. That is a 10% increase from 2014. Of the current stocks, 647 million bushels were held on-farm, a 9% decrease from last year and 31% of current wheat stocks. 1.44 billion bushels were held off-farm, a 21% increase from last year and 69% of the current wheat stocks.

The Rural Mainstreet Index released by Creighton University, reported farmland prices slightly lower in September. “This is the 22th straight month the index has moved below growth neutral. But, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices. On an annualized basis farmland prices are declining by 6-7%,” said Professor Ernie Goss.

The USDA 2014 Census of Agriculture report was released in September, highlighting the demographics of farming and agriculture land ownership. The most intriguing portion of the report highlighted how landlords had acquired the land they lease. Farmland is exchanged in many different ways including auction sale, inheritance, and private sale. Though auctions sales may be the most glorified of the three processes, auctions represented on 4% of rented farmland transactions in 2014. The overwhelming majority, 64%, were sold via private sale involving a previous acquaintance or relationship with the prior landowner.

Our full attention will be on harvest in October and the additional reports of actual yields from farmers. Day-to-day weather will also pay a big factor into commodity prices both in futures contracts, but also in cash bids as well. Any delay in harvest will substantially impact cash grain bids.

We also look forward to the farmland buying season which will unofficially commence once harvest is complete across the U.S.

Written By: T. Marc Schober