Is land still a solid investment?

In recent weeks we have seen record-setting land sales.  RD Schrader, president of Schrader Real Estate says land prices continue to hold steady.  But – what about the impact of this year’s drought?

Schrader says – that depends.  “The drought had different impacts on different areas,” he says.  “Overall – I’m not so sure there hasn’t been more cash that has been injected into the marketplace due to the commodity prices and insurance programs than what may have been projected at the beginning of the year.”

He tells Brownfield with commodity prices at their current levels – the return on investment continues to be strong. 

The million dollar question is will that continue?  “Nobody has a crystal ball to see what the future holds,” he says.  “Basically these prices are the function of expected future earnings – and earnings have been good the past few years.  Farmers have made some money and been able to put it back into the land market.”  When farmers have cash flow, he notes they tend to invest it back in to land.

The majority of these land purchase, Schrader says, are still being made by farmers.

AUDIO: RD Schrader – Land Prices (5:08mp3)

Brazil exporting more corn and ethanol

Brazil is stepping-up to fill a void left by the U.S. on the global corn and ethanol market. Reuters reports Brazil exported 3.66 million metric tons of corn in October, up from 3.14 million in September and 1.52 million a year ago.

Shipments are expected to hit 17 million metric tons this year; Brazil’s corn crop was a record last year at nearly 73 million metric tons.

Brazilian ethanol exports reached 492.2 million liters (130 million gallons) in October, up from the 452.7 million liters (119.5 mil gal) in September and 247 million liters (65 mil gal) in October a year ago.

Raw sugar exports also hit a record last month.

Ukraine will not halt wheat exports…

Reversing earlier reports, Ukraine says they will not halt wheat exports on November 15th. The press service of the Social Policy Ministry says the Cabinet of Ministers of Ukraine did not consider restricting grain exports and is not planning to make such a decision. The Ministry says global grain stocks are at a low level and prices are going up and “Our grain growers should be given a chance to obtain a good reward for their labor.”

Last week Ukraine’s Agriculture Ministry said due to the weather the fall harvest was below expectations and with the high pace of exports, they would ban wheat exports effective November 15th. The ban was never confirmed by the prime minister. Now the Ag Ministry says they will consider all necessary measures if the country’s wheat stocks fall to a critical level but for now, no critical state exists.

Reuters cites traders who say the country does not have enough wheat in stock to keep exports at the current pace so some kind of curbs are likely. Dow Jones says grain traders and government officials met on October 19th and agreed no wheat would be exported after November 15th. So while there may not be any official government ban, exports will probably stop because “no trader would dare act against the government’s wishes.”

After a disappointing harvest in 2010, Ukraine imposed complicated customs requirements which effectively limited exports.

Livestock environmental workshop to be held in South Dakota

There’s an environmental training session for concentrated animal feeding operators next Wednesday, November 7, in Huron, South Dakota. The session includes specialists from South Dakota State University as well as from state and federal agencies. The training fulfills environmental and manure management requirements for state concentrated animal feeding operation permits. It also qualifies for Certified Crop Adviser credits.

Even producers not applying for a permit will benefit from the information, according to the news release. Current pollution control programs encourage all livestock producers to voluntarily adopt production and manure management practices that protect water quality.

During the morning session, SDSU Environmental Quality Engineer Erin Cortus will discuss water quality. John Lentz, resource conservationist with the NRCS, will talk about implementing conservation practices to improve sustainability. Jason Roggow, a natural resources engineer with the South Dakota Department of Environment and Natural Resources, will give an overview of the South Dakota DENR livestock permit program.

In the afternoon, SDSU Soil Specialist Ron Gelderman will discuss managing nitrogen and phosphorus in land applications of manure. Lentz and Gelderman also will go through nutrient management planning worksheets. SDSU Swine Specialist Bob Thaler will lead a session on livestock nutrition options for reducing nitrogen and phosphorus content of manure. Cortus will conclude the day’s training with a session on air quality and odor.

Registration for the day-long program begins at 8:30 a.m. at the Crossroads Convention Center, 100 Fourth St. S.W. in Huron. The cost is $50 and includes lunch, breaks and training materials. To register, call Candy Willms at 605-688-5141.

Ground beef market unaffected by LFTB controversy

Supermarket News, a weekly trade publication for the food distribution industry says “ground beef sales have been unaffected by the controversy.” The report quotes Sherry Frey, vice president of account services at the Nielsen Perishables Group who says they didn’t see any notable decline. “In the 52 weeks ending August 25, ground beef volume has declined 3.2% compared to last year, but this decline is actually less than the total beef category’s decline of 4.8%.” Frey says that is mostly due to retail prices being higher because of availability and feed prices.” She says they have noticed more people buying chicken in recent weeks because of the beef prices.

While many retailers stopped handling product containing LFTB, Hy-Vee stores started labeling the product with “may contain lean finely textured beef”. Southeast Region meat supervisor Kurt Johnson says once consumers learned it was beef and it was safe, “it became a non-issue”. Johnson says “People just want to know what’s in their product.” In fact, sales of product containing LFTB have picked-up a bit lately because “it’s a more affordable option for a lot of people right now.”

The report’s author, Jenna Telesca concludes; “it’s clear that retailers don’t see the LFTB controversy as the culprit behind any sales declines.”

ABC News asks judge to dismiss BPI suit

Lawyers for ABC News have asked a judge in South Dakota to dismiss the defamation suit brought by Beef Products Incorporated over lean, finely textured beef (LFTB). ABC’s legal counsel argued that while the term “pink slime” used repeatedly in the news stories may be “unflattering” it is not inaccurate. They contend the product is pink and, like ground beef, has a slimy texture.

BPI filed suit in September under South Dakota’s defamation law and a 1994 state law which makes it illegal to knowingly spread false information about a food product’s safety. ABC says the reports never said the product was unsafe.

The company seeks $400 million in compensatory damages, which could triple under South Dakota law as well as punitive damages from ABC News, news anchor Diane Sawyer, reporters Jim Avila and David Kerley and former USDA microbiologist Gerald Zirnstein who coined the term “pink slime” in an email to colleagues in 2002.

Last week ABC filed to have the case moved from state court to federal court in South Dakota.

U.S. cheese production up slightly in September

Cheese production in the U.S. in September totaled 871 million pounds, up 0.3 percent from September of 2011. Italian type cheese production was 0.3 percent higher at 370 million pounds while American type cheese output increased 2.3 percent from a year ago at 346 million pounds.

Wisconsin total cheese production in September was 230 million pounds up 3.9 percent from a year ago. American type cheese production in the Badger State increased 1.7 percent to 64.8 million pounds with cheddar up 3.3 percent. Italian type cheese production was 3.3 percent higher as well at 118.5 million pounds.

Total cheese production in California in September was 170 million pounds down 6 percent from a year ago. American type cheese production in the Golden State was 47.85 million pounds up 1.3 percent with cheddar down 4.9 percent. Italian type cheese production was 5.4 percent lower at 106.45 million pounds.

Rounding-out the top five: Idaho 74.4 million pounds (+6.7%): New York 61.5 million pounds (-4.5%) New Mexico 60.9 million pounds (+8.5%)

U.S. butter production was 1.1 percent below a year ago at 136 million pounds in September.

January through September, U.S. total cheese production is running 2.5 percent above a year ago however that increase has been narrowing since it was 4.7 percent in February. Butter production is 3.7 percent above a year ago; again the increases have been steadily declining since hitting 10.4 percent in February

Other products produced in September compared to a year ago:

  • Nonfat dry milk 84.4 million pounds (-18.7%)
  • Skim milk powders 42.6 million pounds (+22.6%)
  • Dry whey 74 million pounds (-3.6%)
  • Lactose 86.7 million pounds (+4.6%)
  • Whey protein concentrate 34 million pounds (-4.4%)
  • Regular ice cream 58.8 million gallons (-14.8%)
  • Lowfat ice cream 33.4 million gallons (-10.3%)
  • Sherbet 3.17 million gallons (-1.5%)
  • Frozen yogurt 4.97 million gallons (-6.7%)

Read the full NASS report here:

Another solid finish for soybeans

Soybeans were higher on fund and commercial buying, along with spillover from the outside markets. The dollar was lower with the Dow and crude oil higher. The supply remains tight and demand is strong, and the trade’s watching weather in South America. According to Dow Jones Newswires, some parts of Argentina remain too wet to plant, adding sections of Brazil are drier than normal. Soybean meal and oil were up, following beans. According to Brazil’s Foreign Trade Ministry, soybean exports during October were 906,900 tons, down on the month and the year, with meal at 1.38 million tons, and bean oil at 110,300 tons; meal sales were above September but below October 2011, while the reverse was true for oil. USDA’s weekly export sales report is out Friday at 7:30 AM Central. Soybeans are pegged at 500,000 to 700,000 tons, meal is seen at 120,000 to 225,000 tons, and oil is placed at 0 to 20,000 tons.

Corn was mixed with profit taking in the nearbys and commercial buying in the deferreds. There was no real fresh news, but the trade’s keeping an eye on damage to what hasn’t been harvested in the Eastern Cornbelt. In any event, end user demand is strong and the trade expects an increase in exports. However, in the interim, there’s definitely strong export competition. Brazil’s Ag Ministry reports monthly corn sales were a record 3.66 million tons during October, the third straight month with a new all-time high, and well above the October 2011 total. Ukraine’s corn exports are also running well ahead of last year’s pace. Ethanol futures were lower. Weekly U.S. corn sales are estimated at 110,000 to 400,000 tons.

The wheat complex was higher on commercial and fund buying, along with spillover from beans and the outside markets. Exports from Russia and Ukraine continue to move out at a faster than average pace, leading to concerns about supply. Ukraine’s Agrarian Confederation reports that since the start of the marketing year July 1, wheat sales are 4.125 million tons, very close to the target of 5 million tons for the entire marketing year. Russia’s Union of Grain Producers reports wheat exports since July 1 are 8.2 million tons, with all grain sales at 10.3 million tons. Moscow expects sales for the current marketing year to be 10 million to 12 million tons. SovEcon projects the wheat crop at 37.5 million tons, compared to their last guess of 38 million. U.S. winter wheat is developing slower than normal and the first crop condition rating of the year was the lowest in more than 20 years. European wheat was firm on weather concerns and good export demand. South Korea bought 24,700 tons of U.S. milling wheat. Weekly U.S. wheat sales are projected at 300,000 to 600,000 tons.

Economist: Underwriting losses not as bad as predicted

Kansas State University ag economist Art Barnaby says earlier estimates of up to 40 billion dollars in crop insurance underwriting losses were wildly off the mark.

Barnaby continues to stick by his earlier estimate of less than 15 billion dollars.  But he says that number is dropping every day and could end up closer to ten billion dollars due to better than expected crop yields, a drop in prices and other factors.

“I’ve seen numbers—estimates—much, much lower than that.  I’m not sure I’m ready to buy into those,” Barnaby says. “I think they may be as much of an outlier as the 40-billion numbers that were thrown out early.  But I certainly think under ten billion is in the ballpark.”

Some politicians and others have expressed concern over the large crop insurance indemnities that will be paid out to some farmers because of this year’s drought.  But Barnaby points out that many of those farmers have been paying premiums for the past ten years without ever filing a claim.

“On the farmer’s side, why are you upset now that I collect?  You really shouldn’t be—but nonetheless that’s what’s going on,” he says.

Barnaby says that, over the past decade, the crop insurance program has actually had an underwriting gain.

Barnaby made those comments in an interview with Brownfield at a crop insurance workshop in Grand Island, Nebraska.

AUDIO: Art Barnaby (10:59 MP3)

 

Farmers National official discusses land values, rental rates

One of the speakers at this year’s Ag at the Crossroads Conference in Lincoln, Nebraska was Lee Vermeer, vice-president for real estate operations with Omaha-based Farmers National Company.

Following his presentation, Vermeer discussed land values and rental rates with Brownfield’s Ken Anderson.

AUDIO: Lee Vermeer (8:06 MP3)