Despite late planting in many areas, most fall crops are in good or better condition than last month, and expectations of strong production this year continue to weigh on crop prices. With the correlation of land values to crop prices typically 90% or higher, look for continued downward price pressure on land tracts growing crops such as corn, with burdensome supply outlooks.

Growing conditions vary with precipitation levels. Heavy rains have improved soil moisture levels in the Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts, though there are isolated reports of hail and flood damage. However, recent rains were too late to aid the development of the winter wheat crop and actually delayed the harvest in the Kansas City and Dallas Districts, leading to expectations for below-average yields. Persistent drought in the San Francisco District is prompting some producers to curb new planting to conserve water for permanent crops.

Prepared by the Federal Reserve Bank of Kansas City and based on information collected through July 7, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond – Replanting of crops due to extended winter weather has been completed and wheat harvesting is finished up in the Carolinas. Overall, fertilizer prices remain steady, while agricultural chemical prices and crop seed prices have increased slightly. Some agribusiness owners report lower commodity prices compared to last year. However, a sod company report higher prices as planting and harvesting increased due to high demand and low inventory. Cotton prices have stabilized.

Atlanta – Much of Tennessee, southwest Louisiana, and the southernmost tip of Florida continue to experience abnormally dry conditions. Some other areas have received excessive rain causing delays in production although recent, dryer weather conditions have allowed planting to continue. Producers are benefiting from higher prices for many of their agricultural products, lower costs for feed and fertilizer, and fuel costs are leveling off. Growing international demand and tight domestic supplies are driving recent record-high cattle and hog prices.

Chicago – The District’s corn and soybean crops made up ground after a late start to planting as favorable weather helped plants emerge more quickly than the five-year average. The consensus among contacts is that the corn and soybean crops are in excellent shape, but are unlikely to set harvest records because of late plantings. Corn, soybean, and wheat prices have moved down since last month’s report. More farmers than a year ago have taken advantage of the spring rally in crop prices to lock in a profit on a larger portion of their expected harvest. Hog prices have risen as disease affected supplies. Farmers are receiving lower prices for milk and cattle, yet these prices remain well above production costs.

St. Louis – District farmers wrapped up corn, cotton, and rice plantings in late June. In contrast, soybean and sorghum plantings are behind the five-year average rate of progress in Tennessee, Arkansas, Mississippi, and Kentucky. Over 90% of the region’s corn, cotton, rice, sorghum, and soybean crops are rated in fair or better condition. The winter wheat harvest is behind its five-year average rate of progress for all states in this region.

Minneapolis – Crop producers have made progress catching up on the late spring, but flooding due to heavy rains has led to crop losses in some areas. Corn and soybean emergence rates are consistent with five-year averages, and most crops are in good or excellent condition. District producers have planted fewer acres of corn and more soybeans this year, in line with expectations. The USDA forecasts solid harvests and a slight reduction in crop prices by year end. Prices received by farmers fell in June from a year earlier for corn, soybeans, wheat, and hay; prices increased for cattle, hogs, poultry, eggs, and milk.

Kansas City – Heavy summer storms in June improved soil moisture for developing crops and pastures but also caused some wind, hail and flood damage. Wet fields have delayed the winter wheat harvest in Oklahoma and Kansas, and yields will depend on the extent of drought, freeze and hail damage. Despite expectations of a poor wheat harvest in much of the region, wheat prices have fallen since the last survey period. The corn and soybean crops are in good condition overall, and improved growing conditions have led to a drop in prices for both crops. Cattle prices continue to rise, but feeder cattle prices have recently increased much faster than fed cattle prices and narrowed margins for feedlot operators. The cumulative effect of reduced piglet numbers due to porcine epidemic diarrhea virus and strong export demand for pork is supporting further gains in hog prices, even though pork production forecasts have been raised due to heavier dressed weights and higher than expected slaughter in the second quarter.

Dallas – Drought conditions have eased since June. Widespread rains have greatly improved prospects for row crops, especially cotton, but arrived too late to aid the Texas wheat crop, which is expected to be down 20% this year. Most crop prices have fallen over the past six weeks due to expected stronger U.S. production. Pasture conditions have improved and cattle prices continue to set new historical highs. Domestic demand for beef remains very strong despite record prices, while international demand for cotton remains low.

San Francisco – Drought conditions are crimping production of some agricultural and resource-related goods. Contacts cite ongoing concerns about water costs and availability. They also mention that it will be challenging for regulatory agencies to address issues related to pricing and prioritizing limited water supplies if low levels of rainfall and snow pack persist next year. Producers are reducing livestock herd sizes and plantings of annual crops, such as tomatoes and rice. Most permanent crops, including nut and fruit trees, have not been affected yet, but some farmers may choose to reduce new plantings or remove less productive orchards. Farmers in Idaho anticipate high yields of grains, wheat, and potatoes this year. Dairy operations continue to benefit from low feed costs. ■

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Drought conditions are causing problems in the Southern Plains and Pacific West, and, to a lesser extent, in the Midwest, according to Federal Reserve System contacts. Dry weather, particularly in California and Arizona, has prompted farmers to trim crop plantings and cut livestock herds. Drought pressure is also widespread in the Texas panhandle and parts of Iowa. In the Southeast and Northern Plains, Fed sources report that excessive moisture has delayed plantings.

Planting has progressed well overall in the Midwest and in Idaho. Both the Kansas City and Dallas Fed Districts report problems with the quality and quantity of the winter wheat crop, though winter wheat crops are generally in good condition in the St. Louis District. A fatal pig virus continues to impact hog growers across the Minneapolis and San Francisco Districts, which has helped boost hog prices. Low cattle supplies and strong demand is helping push up beef prices in the Minneapolis and Kansas City Fed regions.

Prepared by the Federal Reserve Bank of New York and based on information collected through May 23, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond – Contacts report that fertilizer prices remain stable, chemical prices are up slightly, and farm equipment prices have also edged up. A South Carolina farmer said that delayed planting increased field days but did not affect his crop plans. Wholesale agribusiness executives report that sales are at normal seasonal volumes.

Atlanta – Parts of the District have seen excessive rain, with flooding reports in lower Alabama and the Florida panhandle. There are some reports of crop damage and delayed planting due to excessive moisture.

Chicago – Corn and soybean planting has progressed quickly after rain and cool temperatures slowed fieldwork earlier in the spring, though planting in Michigan and Wisconsin is still lagging. Cold soil temperatures are still a concern; some contacts report that the corn crop is in good shape but that soybean emergence is behind average. Moisture levels are at least adequate for planting throughout the region, although parts of Iowa remain in drought. Corn and wheat prices fell since the April report, while soybean prices have drifted higher. Livestock prices remain well above the levels of a year ago, although hog prices have moved lower. High milk prices are encouraging dairies to expand, and high cattle prices appear to be leading to some new entrants into the livestock business. Farm machinery is readily available after several years of waiting lists for purchases.

St. Louis – As of mid-May, on average, corn planting across the region was about 81% complete and about 93% of the winter wheat crop was rated in fair or better condition.

Minneapolis – District farmers’ financial condition has continued to weaken, while livestock and dairy producers are in better shape. More than half of respondents to the Minneapolis Fed’s April Survey of Agricultural Credit Conditions said farm incomes and capital spending fell in the first three months of 2014, and about the same percentage expect it to decrease in the second quarter. A late spring and heavy early-season rains significantly delayed corn and soybean plantings throughout the District. Hog producers continue to lose large numbers of animals to porcine epidemic diarrhea virus, pushing up prices for pork, as well as poultry. Cattle producers continue to enjoy record beef prices, as overseas demand grew and efforts to rebuild the U.S. herd keep cattle from going to slaughter. Grain elevators report delays in shipping grain due to rail capacity constraints.

Kansas City – Farm income prospects for crop producers have dimmed since the last survey period, while profitability in the livestock sector has improved. Winter wheat growers are concerned that the poor condition of the crop will limit profits despite an upswing in wheat prices. Corn and soybean prices have been steady since the last survey period but remain well below year-ago levels. Spring planting has prompted increased demand for operating loans to pay for crop inputs. In contrast, profit margins for livestock operators have improved further as low cattle and hog supplies push prices higher and feed costs remain flat. Strong demand for grazing pastures is helping to support a modest rise in ranch land values, but cropland values generally are holding steady. Farm loan repayment rates have dipped below year ago-levels, and District bankers report a slight rise in carry-over debt relative to last year.

Dallas – District drought conditions have worsened further since the April report. Most of the Texas panhandle has fallen into exceptional drought, the most severe drought classification. Winter wheat crop conditions have deteriorated and growers have abandoned a relatively large share of Texas’ wheat acres, which will not be harvested this year. Cotton planting season has begun and farmers are already concerned about poor production due to the very dry soil, particularly for non-irrigated cotton. Agricultural commodity prices have stayed strong. Export sales for cotton have fell over the last six weeks in response to high cotton prices.

San Francisco – Demand for fruits, vegetables and livestock products increased, but production in agricultural industries was uneven across the District. Concerns about water costs and availability have mounted in some areas. Contacts note that drought conditions in California and Arizona have led to reduced herd sizes and decreased plantings of annual crops, including tomatoes and rice. On the other hand, farmers in Idaho anticipate adequate water supplies and have planted grains, hay, and potatoes ahead of schedule, expecting the level of plantings in 2014 to be similar to 2013. In general, dairy operations are benefiting from low feed costs. Pork production remains weak as a fatal virus continues to sweep through pig farms in some areas. ■

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The Washington State Investment Board continues to advance its plan to add agricultural real estate and related investments to their $100 billion investment portfolio. Since November, the Board has approved $400 million in commitments to three managers specializing in U.S. permanent and annual cropland. Another $150 million agriculture facilities investment is up for Board approval next month.

In April, the Board approved up to $250 million to U.S. Farming Realty Trust III LP, a commodity row-crop farmland fund sponsored by International Farming Corporation, Kinston, N.C. The four-year-old firm manages a 150,000-acre cropland portfolio valued at $750 million, according to company material. Other institutional commitments to International Farming Corp. include $47 million from Los Angeles-based First Pacific Advisors. FPA Crescent Fund initially allocated $8.5 million to U.S. Farming Realty Trust I in the first quarter of 2011 and now has $35 million invested in the private fund. At the close of 2013, FPA Crescent valued that holding at $38.7 million, a 10.6% gain on its cost. That compares to an average 29% gain for U.S. cropland values for the two years through 2012, according to the U.S. Dept. of Agriculture annual survey. (Full year 2013 USDA data will be out in August.) The mutual fund’s $5.2 million investment in U.S. Farming Realty Trust II was valued at $5.3 million at year end 2013, a 2% gain. Panelists in the Mid-South/Southeast Farmland Market Trends survey cite International Farming Corp. as among the most aggressive bidders for cropland in the region.

In January, the Board agreed to invest up to $50 million in ACM Permanent Crops LLC, a co-mingled fund focusing on citrus, berries, table grapes and nut production, and up to 25% of assets in packing, processing and storage facilities. The fund is targeting a 12%-14% annual average return (income portion: 8%-10%) and has attracted $124.2 million of its $200 target from three investors in Colo., Ore., and Wash., according to May securities filing. Equilibrium Capital, Portland, Ore. is sponsoring the fund via its Agriculture Capital Management unit. Equilibrium Capital principal Tom Avinelis is a co-founder and owner of AgriCare, a farm manager with some 9,500 acres in California and Oregon under management.

An Arizona valley cropland development project by International Farming Corp.

In November, the Board also approved up to $100 million to veteran farmland manager UBS AgriVest. The separate account holding, dubbed Olympic Sun LLC, will invest in permanent and vegetable crops, with UBS taking a 2% stake alongside WSIB. UBS AgriVest sponsors UBS AgriVest Farmland Fund Inc., a private open-end real estate investment trust with 35 investors and $480.2 million in net assets. The REIT owned of 50 cropland properties totaling 86,162 acres at the close of March. Sonoma County Employees’ Retirement Board is the REIT’s biggest investor, with a 19% stake valued at $88.6 million. UBS AgriVest Farmland Fund has earned an average net 9.1% annually for the five years through March 2013, versus 12.6% for for its farmland index benchmark, which excludes fees and management expenses.

Earlier this month, the Board’s private markets committee recommended up to a $150 million investment in Cascade Midstream Partners I LLC, a separate account that will invest in grain storage and processing facilities in the U.S. Northern Plains and Canada. Bunge North America, which is sponsoring and managing the investment through its Climate Change Capital Limited asset management unit—will take a 2% stake in the venture.

The allocations to International Farming Corp., UBS AgriVest and the Equilibrium Capital unit are subject to continuing due diligence and final negotiation of the investment contracts. The Cascade investment is subject to Washington State Investment Board approval in June.

© 2014 Farmland Investor Letter All rights reserved.

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Federal Reserve contacts report that agricultural conditions have improved in recent weeks in the Midwest, but weakened across the Richmond, Atlanta, St. Louis, and Minneapolis Fed Districts. Weather disruptions are delaying crop plantings and commodity shipments. A deadly pig virus is impacting hog growers across the Richmond, Chicago, Kansas City, and San Francisco Districts. Prices of beef and pork rose.

Adverse weather is affecting several districts. Winter wheat is suffering due to dry conditions in the Kansas City District, and drought conditions continue to worsen in the Dallas Fed region. In contrast, wet field conditions are delaying planting in the Richmond and Atlanta Districts. Additionally, the Chicago Fed reports that the slow arrival of spring-like weather also is delaying fieldwork, although in some areas, crops perform well after late planting. The Minneapolis and San Francisco Feds report that winter weather disrupted transportation of some crops. Crop prices have increased in recent weeks but remain below year-ago levels across most of the country. Higher soybean prices have shifted planting intentions away from corn. Dairy demand is booming in the Dallas Fed region, especially for export, and prices for dairy products have hit record highs. Hog operations in a few Districts are battling porcine epidemic diarrhea virus, which is fatal to young pigs, and pork prices continue to rise. Beef prices have reached record highs.

Prepared by the Federal Reserve Bank of Richmond and based on information collected through April 7, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

 Richmond – Persistent cold temperatures and wet field conditions have delayed row-crop planting in some locations. Contacts report slower small grain growth and some freeze damage to fruit trees. A South Carolina agribusiness reports that winter weather pushed back some of their harvesting timelines, although demand levels remain solid. Beef prices remain high and pork prices have risen due to the spread of porcine epidemic diarrhea virus. The virus appeared in the U.S. for the first time in April and has killed thousands of piglets. The disease is cutting into pork supplies and prompting some traders to wager that hog prices could set records this year.

Atlanta – Sufficient rainfall has left only small pockets of dry conditions across the six-state (Ala., Fla., Ga., La., Miss. and Tenn.) region, some growers have delayed spring planting due to too much precipitation. Florida’s citrus growers continue to seek ways to mitigate the effects of citrus greening and contacts are hopeful that new research funding included in the recently approved Farm Bill will help find a solution to this problem.

Chicago – The slow arrival of spring-like weather is delaying fieldwork. However, concerns about a late start to planting are muted, especially in Illinois and Indiana where 2013 crops performed well after being planted late. The mood among farmers improved as crop prices increased enough from winter lows that breakeven outcomes now seem possible. Hence, there has been more forward contracting of crops than a year ago to manage risk. Higher soybean prices still support a shift in planting intentions toward soybeans and away from corn, but not as much as earlier this year. Fertilizer costs are lower than a year ago, and seed costs are flat. The livestock sector moved further into the black, as milk, hog, and cattle prices increased. Given lower numbers of hogs and cattle available to market, animals were fed longer in order to gain additional weight. Although hog operations are still battling porcine epidemic diarrhea virus, but there are signs that the worst has past.

St. Louis – Farmers in the southern Midwest and northern Mid-South are expected to plant 4% fewer acres of corn this year. In contrast, District farmers are expected to plant 2% more acres of soybeans and 38% additional acres of rice this year than in the previous year.

Minneapolis – Agricultural conditions are mixed, with livestock and dairy producers performing well, and crop producers in worse shape. While crop prices increased slightly in March from the previous month, they remain significantly below the strong levels of recent years. March farm commodity prices fell from a year earlier for corn, wheat, soybeans and chickens; prices increased for cattle, hogs, milk, eggs and turkeys. A freight rail backlog is causing significant shipping delays for dry bean producers and will also likely delay getting the winter wheat harvest to market. District farmers intend to plant fewer acres of corn and significantly more acres of soybeans and wheat in 2014 compared with last year.

Kansas City – Crop growing conditions remained dry in March, while livestock prices increased further since the Feb. 24th survey period. The winter wheat crop is in need of moisture and rated in mostly fair to poor condition. Spring fieldwork has begun, and District farmers are following national trends by intending to plant slightly more soybeans and less corn. With crop prices still lower than a year ago, farm operating loan demand is up as farmers finance a larger portion of crop input costs. However, global supply concerns continue to support strong export prospects, and crop prices rose to a six-month high during the reporting period. Low cow inventories are keeping feeder cattle prices elevated, and strong export demand supports higher fed cattle prices. In addition, hog prices surged as the on-going swine virus cut inventories further.

The Southern Plains is emerging from one of its driest winters on record. Since January 1st, the area considered in extreme drought has more than doubled in Texas, tripled in Oklahoma, and expanded more than six-fold in New Mexico. Source: NIDIS

Dallas – Drought conditions worsened in March, particularly in the Texas panhandle which is where much of the state’s cotton is grown. Winter wheat crop conditions deteriorated somewhat. Farm commodity prices rose over the reporting period, with across-the-board increases in crop prices and particularly strong gains in livestock prices. Beef prices rose to record highs in March in light of strong exports and stable domestic demand coupled with tight cattle supplies. Dairy demand boomed—especially exports—and prices for dairy products moved to record highs. The rise in prices has allowed all segments of the livestock industry to be profitable, an occurrence not all too common.

San Francisco – Demand for most agricultural goods is largely stable, but the supply was somewhat constrained as several weather-related factors crimp production. Demand was stable or up for crop and livestock products, and particularly robust for dairy items. However, storms in parts of the District disrupted transportation of winter vegetables. Contacts’ concerns about water costs and availability mounted, and limited water for irrigation contributed to decreased yields of annual crops, including tomatoes, greens, and onions, in California’s Central Valley. Water shortages led some farmers to reduce cattle herd sizes as well. Pork production fell as some hogs in the District contracted a fatal diarrhea virus. ■

 

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With the California wine market on a cyclical upswing, Harvard Management Company, the Boston-based investment shop for Harvard University’s $33 billion endowment, is quietly assembling a Central Coast vineyard play. The area—located between San Francisco and Los Angeles—is rising in stature as a wine grape-growing region, with Wine Enthusiast magazine dubbing the Paso Robles American Viticultural Area as last year’s “Wine Region of the Year”.

The region is in the cross-hairs of numerous investors. Last November, Hancock Agricultural Investment Group paid $44 million for two Monterey County vineyards totaling 1,582 acres. Hancock, a Boston-based unit of Canadian insurer Manulife Financial Corp., overseas $2.1 billion of farm real estate.

Mercator Research confirmed Harvard is making its Central Coast purchases via Brodiaea Inc.—a Delaware domiciled entity formed in June 2012. Last month, Brodiaea paid $10.1 million or $1,322 per acre for a 7,622-acre cattle ranch in northeast Santa Barbara County. Brodiaea has spent $61 million so far to acquire 10,176 acres in Santa Barbara and San Luis Obispo Counties, estimates David Hamel, an appraiser in Santa Maria.

Harvard’s recent Central Coast vineyard investments were initially puzzling in light of the endowment’s November 2011 sale of its anchor stakes in Silverado Premium Properties, LLC and Silverado Winegrowers Holdings LLC, two private Napa, Calif.-based vineyard sale-leaseback investment funds heavily invested in the Central Coast counties of Monterey, San Luis Obispo and Santa Barbara. At the time of the sale, market participants estimated that Silverado Premium Properties’ holdings were worth $500 million, suggesting Harvard and co-investor Hancock Agricultural Investment Group received around $375 million from buyer TIAA-CREF, for their combined 75% stake in Silverado Premium Properties and a 79% interest in Silverado Winegrowers Holdings. Market contacts suggest that Harvard exited Silverado after it became apparent that the endowment’s aggressive vineyard investment plan could compete with Silverado.

Brodiaea’s investment’s are being assembled and managed by Grapevine Capital Partners, a San Luis Obispo venture launched in 2012 by James Ontiveros and Matt Turrentine. Mr. Turrentine declined to identify the funding source for Brodiaea.

Andrew Wiltshire, Harvard Management’s alternative assets manager, also declined to comment on the investment. In January, Harvard secured 125 investors to enable Brodiaea to qualify as a Real Estate Investment Trust. A REIT structure would make it easier for additional investors to join or exit the venture, and could also pave the way for an eventual public stock offering.

Between July 2012 and February 2014, Harvard representatives have knocked on doors and quietly spent $61 million for 10,176 acres in Santa Barbara and San Luis Obispo Counties.

The Brodiaea purchases have attracted local attention for both the market-leading prices paid for properties, and Grapevine Capital’s approach of methodically soliciting sales of unlisted properties. Near Shandon, a farming town in proximity to several large vineyard plantings, Brodiaea paid an estimated $40,366 per plantable acre. That works out to premiums of $5,000 to $10,000 per acre based on historical sales in Shandon. “The sales weren’t making any sense when they came across,” notes an area appraiser.

Though Brodiaea was aggressively bidding at the top of the market, the purchases could pay off if the vineyards can produce big crops and ride the recovering wine grape cycle.

Some market observers have wondered if Brodiaea was a well-timed water play in light of the region’s worsening groundwater shortage. Last August, the San Luis Obispo County Board of Supervisors adopted an “urgency” ordinance that prohibits any new development or new irrigated crop production unless the water it uses is offset by an equal amount of conservation. Water levels in the Paso Robles Groundwater Basin have fallen sharply in recent years—two to six feet a year in some areas—causing wells to go dry and forcing many vineyards and rural residents to drill deeper wells, according to local accounts. The irrigation development restriction remains in place through August 26, 2015. The basin supplies water for 40% of the county’s agriculture sector.

Brodiaea’s managers are now busy ripping out old vines on the San Luis Obispo tracts and redeveloping the properties. Development studies are still underway for the Santa Barbara ranch.

Brodiaea’s purchases followed a 2009 Harvard Business School case study which focused on water resources and farming in California’s Central Valley. Mr. Ontiveros says the timing of Brodiaea’s irrigated land purchases in San Luis Obispo County and the subsequent moratorium on new irrigation development was “pure coincidence.”

Harvard’s California farmland investments are just one of numerous bets in the agriculture and timber sectors that are spread across New Zealand, Romania, Latvia, Argentina, Brazil, Chile, Ecuador and Panamá. The university continues to expand its near six-year old Dairy Farms Partnership, a New Zealand venture in Central Otago, which has grown from 1,125 dairy cattle in 2009 to 7,803 head in 2013.

Harvard bought New Zealand's Big Sky Dairy out of bankruptcy in 2010.

For the year ended June 2013, Harvard valued its New Zealand farm land holdings at $42.8 million, up 49% from the prior year total of $28.7 million, according to a company filing. The venture’s dairy cattle were valued at an additional $11.1 million.  Dairy Farms Partnership also holds stock in New Zealand-based global milk processer and marketer Fonterra Group Co-op Ltd. valued at $10.7 million, and smaller stakes in five fertilizer, farm supply, genetics and irrigation companies. Harvard Management jump-started Dairy Farms Partnership in 2010 by buying the 3,451-acre Big Sky Dairy Farm out of receivership for NZ$34.2 million (Farmland Investor Letter, Dec. 2010). The university made a “bolt-on” acquisition in June 2012 by paying NZ$2.5 million for a nearby 3,415-acre dairy. The deal included NZ$1.2 million for shares of Fonterra.

The Harvard dairy venture reported a $2.9 million operating loss for its fiscal year ended last June, versus a $1.7 million profit in 2012. However, after booking a $3.6 million 2013 paper gain in the value of its farmland holdings, the dairy reported a $4.9 million overall profit. Prospects are looking up this year on expanding global demand for dairy products.  The U.S. Dept. of Agriculture expects the U.S. farm price for milk to average $21.20 per hundredweight this year, versus the $12.83 farmers received in 2009. ■

© 2014 Farmland Investor Letter All rights reserved.

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Federal Reserve contacts report that agricultural conditions continue to soften. The Kansas City Fed notes that farmland price appreciation is moderating from the rapid pace seen in the past few years. Farm-level crop prices fell from a year earlier for corn, wheat, soybeans, hogs, and chickens; prices increased for cotton, rice, oranges, cattle, milk, eggs, and turkeys.

Severe winter weather affected several regions with some crop damage reported by the Richmond and Atlanta Fed districts, while the Chicago Fed notes disruptions in the flow of agricultural products. Both the Kansas City and Dallas Fed districts cite dry conditions adversely affecting wheat crops, while San Francisco reports concerns about water shortages and water costs.

Prepared by the Federal Reserve Bank of Atlanta and based on information collected through February 24, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond: Agriculture contacts reported crop price declines in recent weeks. Falling feed costs and higher cattle prices led contacts to believe it will be a good year for livestock producers. Also, farmers expect an increase in poultry production. However, a North Carolina respondent was concerned about an increase in swine virus in his region. A Virginia nursery owner stated that recent cold weather damage, if any, will not be known for a month or two; even so, he expects a 10% increase in year-over-year sales this spring. A North Carolina agri-business contact reported that tobacco and vegetable producers in his region were cautiously optimistic for the year ahead. In South Carolina, recent ice storms have caused timber damage that is still being assessed.

Chicago: Severe winter weather disrupted the flow of agricultural products between farms and markets during the Jan. 7 – Feb. 24 reporting period. Crops that were sold stayed on farms longer than intended as transportation problems delayed shipments. Contacts also reported shortages of trucks and drivers to deliver inventories from the large harvest last fall. Demand for crops has been better than expected, particularly for corn, pushing inventories lower and prices higher. Soybean prices drifted up as uncertainty regarding the harvest in South America weighed on markets. Concerns about high costs for land rentals were widespread. Livestock producers reported improving bottom lines driven by higher prices for milk, hogs, and cattle combined with lower feed costs. However, some hog farms reported losses of young pigs because of disease. Dairy producers have seen a boost in demand from exports. Contacts report that banks are helping farms restructure costs for the coming season to shore up margins. In some cases, troubled farmers were forced to search for new lenders when denied credit.

St. Louis: Red meat production in the southern Mid-West/northern Mid-South region for 2013 was 1.2% higher than in 2012. The production increase was driven by the District’s largest producers in Illinois, Indiana, and Missouri.

Minneapolis: Conditions continued to soften for area farmers, while livestock and dairy producers remained in better shape. More than half of respondents to the Minneapolis Fed’s fourth quarter (January) Survey of Agricultural Credit Conditions said farm incomes decreased in the last three months of 2013, and two-thirds expected incomes to fall in the first quarter of this year. Cattle and hog producers continued to benefit from high prices and falling feed costs, as did dairy producers, according to survey comments. Informal survey results suggest that farmers are reacting to falling corn prices and intend to plant fewer acres of corn and a potentially record high acreage of soybeans this coming spring. January prices received by farmers fell from a year earlier for corn, wheat, soybeans, hogs and chickens; prices increased for cattle, milk, eggs and turkeys.

Kansas City: Crop growing conditions deteriorated, while livestock prices strengthened since the last survey period. Slightly more than half of the winter wheat crop was rated in fair to poor condition as scattered snowfalls provided only marginal soil moisture. Crop prices edged up from recent lows due to an uptick in export demand and concern that South American corn and soybean production would be lower than previously expected. Feeder cattle prices rose further with historically low cow inventories, and strong export demand supported higher fed cattle prices. Hog prices rose amid an intensifying swine virus outbreak that was expected to constrain pork supplies. In addition, production costs for livestock feeders edged down due to lower feed prices. Agricultural bankers indicated that farmland price appreciation moderated from the rapid pace seen the past few years, and most expected values would level off in 2014.

Dallas: After gradually easing throughout the fall, district drought conditions worsened slightly in January and early February. Wheat crop and pasture conditions deteriorated somewhat due to lack of sufficient rainfall. Cotton prices have rallied since December, which may lead more farmers to favor cotton over other row crops when making planting decisions this spring.

San Francisco: Agricultural production expanded on balance. Demand was stable for most crop and livestock products. Concerns about water costs and availability may cause farmers in the California Central Valley to scale back planting. Contacts expect growers to allocate water to more permanent plantings, such as almond and walnut orchards, before allocating water to annual crops, such as corn. In addition, dairy and meat producers may face higher feed costs due to water shortages. ■

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The Federal Reserve’s January Beige Book of current economic conditions reports that that while crop yields and growing conditions were generally strong and improving at the close of last year, corn and soybean prices remain very low across the country. Because land values are highly correlated to crop prices, we expect cropland prices to soften if grain prices remain weak.

The projected average farm price for the recently harvested U.S. corn crop is $4.40 per bushel—36% under last year’s $6.89 per-bushel estimated average, and the lowest in four years.

Contacts report that an increased number of farmers in the Midwest and western Corn Belt are holding on to their fall crop rather than sell at current prices. Farm conditions are reported as mixed in the Southeast, and weaker in the Upper Midwest.

Prepared by the Federal Reserve Bank of Boston and based on information collected through January 6, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond:  Agricultural reports were generally positive in recent weeks. A few sod and seed companies reported a decline as a result of poor weather conditions. A vegetable farmer in North Carolina said that the excessive rain this season was less destructive than expected, and with increased demand, the year ended better than anticipated. Additionally, a Maryland fruit farmer reported excellent fruit yields due to the cold weather. Another Maryland contact remarked on this season’s increase in corn sales, and added that corn was the leading export crop in his region this year. Reports regarding input and output prices were mixed.

Atlanta: Recent rains improved soil conditions in some areas, while parts of Georgia, Alabama, Louisiana, and Florida experienced dry conditions. Monthly prices paid to farmers for rice and soybeans were up; and prices for corn and cotton were down. The most recent domestic crop production projections for soybeans, corn, and rice were unchanged. Cotton and orange projections were down, although cotton was only down slightly.

Chicago: Corn and soybean prices moved a bit higher over the reporting period, but remained well below their levels of a year ago. Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would. This may lead to increased soybean planting in the spring. Farmers continued to store crops in anticipation of future price increases. In some locations, however, there was an incentive to sell corn sooner, in part because of an increase in demand for ethanol production, which has returned to profitability. Hog prices moved lower, while cattle prices were little changed. Milk prices edged up, and there was evidence of some expansion in Midwest dairy herds. Parts of the region remained in a drought, which makes the timing of spring precipitation more critical. In addition, there was less fertilizer application last fall due in part to cleaner water regulations.

St. Louis: As of late November 2013, around 98% of the region’s winter wheat crop was rated in fair or better condition, as 89% of the winter wheat crop had emerged, on average, across the region. This rate of progress was moderately faster than the average over the past five years.

Minneapolis: Overall conditions for farmers weakened, although livestock and dairy producers saw improvement. Annual production decreased from a year earlier for wheat, soybeans, dry beans and sugar beets; Corn production increased, but price reductions likely outweighed the benefits to farmers. A farm equipment retailer saw a reduction in sales revenue sooner than expected, due to falling crop prices. Sugar beet farmers are facing steep losses this year due to a decline in sugar prices. December prices received by farmers fell from a year earlier for corn, soybeans, wheat, hay, hogs and chickens; prices increased for cattle, turkeys, eggs, milk and dry beans.

Kansas City: Agricultural growing conditions improved in late November and December, but low crop prices limited farm income expectations. The winter wheat crop was rated in mostly good condition with winter storms providing soil moisture and protective snow cover. However, wheat prices fell slightly since the last survey period, and corn and soybean prices remained at their lowest levels since 2010. Some farmers were holding fall crop inventories rather than selling at current prices. Lower income prospects boosted demand for farm operating loans and dampened farm capital spending at year-end. In the livestock sector, weaker demand for pork from Asian markets placed downward pressure on hog prices. While cattle prices were relatively flat, profit margins for cattle producers may improve as better pasture conditions lessen the need for supplemental feed.

Dallas: Drought conditions continued to ease slightly. The winter wheat crop has had a good start, with crop conditions in better shape than they were a year ago. Severe winter weather in many parts of the region in late November and early December slightly delayed some of the cotton harvest, but the moisture improved soil conditions. Cattle producers continued to benefit from low feed prices and high selling prices, prompting optimism for the industry outlook.

San Francisco: Agricultural output expanded. Demand remained strong for most crop and livestock products. A healthy corn harvest in the region contributed to a decline in feed costs. Water resources were adequate in most areas. ■

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The Federal Reserve’s December Beige Book of current economic conditions reports that farmland values continue to rise in most regions, though price increases are moderating.

Contacts reported strong crop yields, while agricultural commodity prices fell and drought conditions stabilized or improved. Richmond, Chicago, and Kansas City reported strong crop yields for fall harvests. Contacts in the Kansas City District noted decreases in farm incomes and increases in the demand for farm operating loans, as prices softened in response to rising yields. The Chicago, Kansas City, Dallas, and San Francisco Districts indicated strong demand and increased profitability in livestock due to lower feed costs. Atlanta contacts reported making investments in various types of agricultural equipment as a means to further improve production and contain costs. Farm prices for wheat, corn, and soybeans fell in the Southeast, Midwest and North Central regions. However, in Midwest, higher exports cushioned the decline. The Kansas City District indicated rising farmland values, although the rate of increase slowed.

Prepared by the Federal Reserve Bank of Cleveland and based on information collected through November 22, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond: Crop yields varied since the November report. Corn yields are above the 2012 record and on track for a strong finish this year. Cotton and peanut yields are steady in North Carolina, though below the 2012 record. South Carolina cotton declined moderately from the 2012 record, while peanut yields there are on par with year ago levels. In animal farming, a contact noted that poultry production was declining on the Eastern Shore of Virginia and Maryland due to regulatory changes and water pollution issues.

Atlanta: Drought conditions in Mississippi and Louisiana have eased while other areas in the Southeast continue to experience abnormally dry conditions. Since November, monthly prices paid to farmers for cotton, rice, and oranges have increased while prices for corn, soybeans, beef, hogs, and poultry have declined. The most recent crop production projections for corn and soybeans are up from last year while cotton, rice, and orange projections are down. Contacts reported making investments in irrigation equipment, grain storage, and replacing smaller equipment with larger, more modern units as ways to improve production and/or contain costs.

Chicago: Harvesting took longer this fall than a year ago, given the larger size of the crop and delays from precipitation. Crop yields are higher than expected across Indiana, Illinois, Iowa, Michigan, Iowa and Wisconsin, even in areas that experienced yield losses from drought. In general, farmers tended to sell soybeans and store corn. Pastures and winter wheat fields were in better shape than they were last year. Crop prices fell over the reporting period, though higher exports of corn, soybeans, and wheat cushioned the decline. Lower fertilizer prices relieved some concerns about 2014 crop production costs. Milk and cattle prices were a bit higher; hog prices fell, although they remained above the level of a year ago. The prospects for livestock producers improved due to reduced feed costs.

St. Louis: As of mid-November, over 90% of the northern Mid-South region’s corn, sorghum, and rice crops had been harvested, while harvest progress of cotton and soybean crops was 81% and 89% complete, respectively. Winter wheat planting was 87% complete, on average, across the District.

Minneapolis: The agriculture sector is experiencing a slight contraction. In the third quarter (October) survey of agricultural credit conditions, 28% of lenders reported that farm incomes decreased from the second quarter, while 15% reported increases; nearly half expect incomes to decrease in the final three months of 2013. October prices received by farmers are down from a year earlier for wheat, corn, soybeans, milk, eggs, turkeys and cattle; prices increased for chickens, calves, hogs and dry beans. An early-October blizzard in western South Dakota killed an estimated 15,000 cattle there. Drought conditions abated in most of the North-Central region in late fall.

Kansas City: A steep drop in crop prices, which partly reflect better-than-expected corn and soybean yields, lowered farm income in the Western Plains and boosted demand for farm operating loans since the last survey period. Some livestock operators in western Nebraska also faced significant herd losses due to a severe October snowstorm. Farm income is expected to remain weaker than last year despite support from crop insurance and a gradual improvement in livestock sector profitability, due to lower feed costs. With reduced incomes, agricultural bankers report the number of requests for loan renewals and extensions is edging up and demand for new farm operating loans is also increasing. Farmland values continue to inflate, but the pace of gains is moderating and most contacts expected values to hold steady through the end of the year.

Dallas: Drought conditions continue to ease, although the Texas panhandle area remains particularly dry. Corn and sorghum production is up, while cotton production is down. The livestock sector continues to benefit from improved pasture conditions, lower feed costs, and high selling prices for cattle. Contacts report that cattle prices hit record highs.

San Francisco: The agricultural sector continues to expand. Demand remains strong for most crop and livestock products, although weaker commodity prices caused some contacts to pare back their expectations for production activity in 2014. Water resources remain sufficient in most areas. ■

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The Federal Reserve’s October Beige Book of current economic conditions reports that demand for quality farmland tracts remains strong despite a continued deterioration in farm sector income prospects.

Heavy rains hurt agriculture in the Richmond, Atlanta, and Kansas City Districts, even resulting in declarations of some natural disaster areas. At the other extreme, some portions of the Chicago, Minneapolis, and Dallas Districts experienced drought conditions, although they eased in some areas over the reporting period. Harvests were reported as behind their normal pace. Nonetheless, crop yields were higher than expected in the Chicago District and about average in the Kansas City District. Strong fruit output was noted in the Richmond, Chicago, and Minneapolis Districts. Cotton output was mixed across the South. Prices fell for corn, soybeans, wheat, hay, cotton, hogs, broilers, turkeys, and eggs, but rose for rice, citrus, grapes, milk, cattle, and dry beans. Livestock producers benefited from lower feed costs, as well as higher beef exports according to the Dallas District. San Francisco reported demand remained strong for most crop and livestock products.

Prepared by the Federal Reserve Bank of Chicago and based on information collected through October 7th, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond: Fruit and peanut yields have been excellent, while cucumber production was reduced this autumn as a result of too much rain. Cotton and soybean harvests are also expected to be low this year because of excess summer rains.

Atlanta: Excessive rain and flooding has heavily damaged some crops. USDA declared most counties in Alabama and many in Georgia, Florida, and Tennessee as natural disaster areas. Since late August, average monthly prices paid to farmers for corn, cotton, soybeans, hogs, and broilers have declined but are higher for rice, citrus, beef, and milk. Lower corn prices benefited livestock producers that rely on corn for feed. Compared to August, cotton estimates for September indicated reduced production in Florida, Mississippi, and Tennessee; higher production in Alabama and Louisiana; and unchanged production in Georgia.

Chicago: Though drought muted production, corn and soybean yields in parts of Michigan, Indiana, Illinois, Iowa and Wisconsin were higher than expected in September. One contact reported that the local harvest would be the best in four years. Soybean yields were more variable than—and not as favorable as—corn yields. In the areas affected by drought, subsoil moisture and genetic advances in seeds reduced yield losses. Rains in September slowed the harvest, even damaging some crops that were mature. Crops harvested and sold early brought a premium due to low crop stocks prior to harvest. Since then, corn prices have dropped relatively more than soybean prices. With much of the harvest still unsold, farmers will store more of the crop in the hope of better selling opportunities over the winter. Milk and cattle prices increased from the previous reporting period, while hog prices decreased. Livestock producers continued to benefit from lower feed costs. Fruit crops bounced back strongly from last year’s devastating freeze, leading to lower prices.

St. Louis: Crop conditions across the southern Midwest and northern Mid-South regions are relatively unchanged from late August. On average, 89% of the region’s corn, cotton, sorghum, and soybean crops were rated in fair or better condition. Similarly, about 80% of the states’ pastureland was rated in fair or better condition. Harvest progress in the region lagged behind the five-year average for all five major crops. Corn, cotton, and rice harvests were 19%, 14%, and 18% behind their five-year averages, respectively. Sorghum and soybean crops fared slightly better at 9% and 8% behind their five-year averages, respectively.

Minneapolis: Agricultural conditions have deteriorated since late August. Drought conditions returned to the eastern part of the District in late summer, with parts of eastern North Dakota and central Minnesota seeing severe drought conditions in early September. Crop progress remains behind average due to late spring planting, and yields are likely to be affected. While much of the region’s corn and soybean crops remain in good or excellent condition, overall quality has fallen in recent weeks. However, in Minnesota, apple growers are expecting a strong harvest. Prices received by farmers in September increased from a year earlier for hogs, cattle, milk, dry beans and chickens; prices for corn, wheat, soybeans, hay, eggs and turkeys fell from a year earlier.

Kansas City: Crop production expectations are little changed from late August, but falling prices have lowered farm income expectations. With most of the corn and soybean crops still in relatively good condition, overall District yields were expected to be about average. As harvest began, however, a greater probability of near-record corn and soybean production nationally led to a drop in prices, cutting farm income expectations. Meanwhile, heavy rainfall in Colorado and flooding along the South Platte River affected some agricultural lowlands. Scattered storms slowed harvest activity and winter wheat planting, but helped soil moisture conditions. Lower feed prices have narrowed losses for cattle feedlot operators and improved profitability for hog producers. Weaker farm income prospects are expected to curtail farm household and capital spending, but demand for quality farmland remains strong.

Dallas: The District remains largely in drought, although the severity lessened in late September in Texas due to good rainfall and the excessive heat tapering off. The harvest has been progressing normally for row crops, and conditions have been mostly fair to good. Improved moisture conditions have increased optimism for the winter wheat crop. Beef exports increased over the reporting period.

San Francisco: Agricultural sales and production activity expanded in the District. Demand remains strong for most crop and livestock products. Competition for grapes in the California wine industry has pushed up grape prices, which has passed through to raisin prices, reducing sales and increasing inventories of raisins. Water availability was adequate on net, but limited in some areas. ■

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The Federal Reserve’s September Beige Book of current economic conditions reports that despite weaker farm income prospects, farmland values continued to set records, with demand for farmland driven in part by high levels of wealth in the farm sector.

Demand for agricultural products expanded during the reporting period, although production activity was limited by extreme weather in some areas. Droughts or dry weather in the Chicago, Kansas City, and Dallas Districts constrained farming activity, but some growing areas within the Chicago and Dallas Districts were relieved by much-needed rainfall. By contrast, extremely wet conditions led to delayed planting and reduced yields for some crops in the Richmond and Atlanta Districts. Kansas City noted that wheat production was below average and corn crops were threatened by disease, and Atlanta and Dallas indicated that the cotton crop was smaller than anticipated. Chicago noted that, despite the dry weather, corn and soybean crops were in better condition than they were during the drought last year. Meanwhile, the St. Louis District anticipates robust production activity, with corn crop yields expected to increase substantially over last year. San Francisco noted that demand was generally strong for most crop and livestock products, and Atlanta found that poultry farming and fruit production were robust.

Prepared by the Federal Reserve Bank of San Francisco and based on information collected through August 26th, the Beige Book summarizes comments received from businesses and other outside contacts.

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond: Farmland values have remained relatively constant since the beginning of this year, according to our recent agricultural credit survey. Heavy rains in the Mid-Atlantic delayed the harvest of some grains and hay cutting, particularly in the lowlands of the Carolinas. According to one source, cotton, peanuts, and soybeans might be damaged by the unusually high levels of precipitation. Another contact in South Carolina noted that some late crops could not be planted and root systems of plants in the ground have not developed well because of the rain. He added that cotton and tobacco crops “do not look good at all.” A number of contacts noted that corn prices had risen and were expected to remain high for some time. Prices of beef and pork were also up, according to sources. Poultry farming and fruit production were strong in recent weeks.

Atlanta: Since the last report, most of the District received ample or, in some cases, excessive rain. These rains have resulted in problems with pesticide efficacy, delayed planting, and damage or reduced yield for some crops. On a year-over-year basis, prices paid to farmers were elevated for meat protein (beef, hogs, and broilers), corn for grain and cotton saw price reductions, and soybean prices remained unchanged.

Chicago: Dry weather affected crop conditions in much of the Midwest during the reporting period, lowering expectations for crop yields. Soybeans especially needed rain in order to fill out pods. Some of Iowa once again faced drought conditions. Nonetheless, corn and soybean conditions remained much better than they were during the drought last year. There were even parts of the Midwest that received adequate moisture and should have above normal yields. Indeed, corn and soybean prices decreased on both spot and futures markets. There were also reports that less of this year’s harvest than usual was pre-sold. Milk, hog and cattle prices declined from the prior reporting period, with livestock producers benefiting from falling feed costs. District milk production once again outpaced the levels of a year ago.

St. Louis: Farmers in the District expect that the corn crop in 2013 will produce, on average, 59% more corn than last year. In contrast, the District cotton crop is expected to fall short of 2012 levels both in terms of acres harvested and production. Across the District states, 92% of the corn crop was rated in fair or better condition; the sorghum and soybean crops were similarly rated, with 93% and 91% in fair or better condition, respectively.

Minneapolis: Conditions for District agricultural producers improved since the last report. While progress remains slower than average, recent warm and dry weather has helped crops catch up, as the majority of the corn, soybean and spring wheat crops are listed in good or excellent condition in all District states. According to the Minneapolis Fed’s July survey of agricultural credit conditions, 90% of respondents said farm incomes increased or held steady over the previous three months, with similar results for household and capital spending. Despite the wet beginning to the growing season, USDA estimates indicate that acres of corn and soybeans planted in District states saw only a small decline compared with last year. North Dakota wheat acreage fell nearly 1 million acres, or 12%, from last year. Prices received by producers increased in July from a year earlier for cattle, hogs, milk, eggs, chicken, hay and potatoes; prices for corn, wheat, dry beans and turkeys fell, while soybean prices were flat.

Kansas City: Despite weaker farm income prospects, farmland values continued to set records, with demand for farmland driven in part by high levels of wealth in the farm sector. Farm income prospects dimmed as drought persisted and crop prices fell. While yields varied, winter wheat production was below average across the District. In some areas without irrigation, dry weather hindered corn development and weakened plants against disease. Much of the District’s corn crop was considered in fair condition although the soybean crop was still rated in mostly good condition. Crop prices fell in August on higher global production estimates. Even with a drop in feed prices, losses continued for most feedlot operators as cattle prices moved lower. In contrast, a rebound in hog prices returned profits to some hog producers. Demand for farm operating loans strengthened with high input costs and reduced farm income.

Dallas: Drought conditions continued to affect most of the district, although the severity in several areas was eased by unusually good July rainfall. Farmers began harvesting row crops, and conditions were mostly fair to good. The cotton crop is expected to be smaller than previously anticipated, causing cotton prices to improve slightly. Feeder cattle prices rose over the reporting period because of tight supplies and lower feed costs.

San Francisco: Sales of agricultural items and resource-related production activity expanded in the District. Demand was generally strong for most crop and livestock products. However, relatively light traffic at fast-food restaurants limited sales of some vegetables. In addition, some grain producers expect slightly lower profits due to price declines. ■

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