March 18. 2015
5¢ higher corn price
is now being projected by USDA. In its
latest update of likely
season-average prices
and carryovers,
USDA lifted its onfarm corn price to
$3.50 to $3.90. That
puts the midpoint at
$3.70, a nickle higher
than its projection in
February.
USDA boosted its
projected 2014-15
export level by 50
million bu. due to
higher projected
global demand. As a
result, projected ending stocks were lowered by that amount
to 1.777 billion bushels. That compares to
1.232 billion bu. for
the previous year and
821 million bu. for the
2012-13 crop year.
USDA left its projections for the other
three major crops virtually unchanged.
Wheat: Lowered
carryover by 1 million
bu., but narrowed its
price range by 5¢ to
$5.90 to $6.10 per bu.
for season-average
on-farm price.
Soybeans: Projected
carryover of 385 million bu. and a seasonaverage on-farm price
of $9.45 to $10.95.
Cotton: Projected
carryover of 4.2 million bales and seasonaverage on-farm price
of 59¢ to 62¢ a pound.
Next up on March 31
is USDA’s Prospective
Plantings and Quarterly
Grain Stocks Reports.
Powerful Insight for LandOwners
Vol. 36 • Iss. 6
Is Dollar Strength a Damper on Farmland Values?
The change in the relationship of the U.S. dollar
versus other currencies, especially the euro, is
likely to have a long-term impact on U.S. farmland values.
That impact is two pronged — one sharply
negative and one that will moderate the full
impact of the first. The negative impact is
through commodity prices. A stronger dollar
makes U.S. grains, soybeans and meat more
expensive to overseas buyers. That’s been the
case the later part of 2014 and early 2015 as corn,
soybean, wheat and cotton prices have stumbled.
It is the opposite of what occurred in the first
decade of the 2000s. The dollar fell during the
decade as federal deficits grew to finance the
wars in Afghanistan and Iraq. Then there were
the massive deficits run up to pull the economy
back from the brink of the credit freeze of 2008.
Commodity prices soared, interest rates declined
and farmland prices soared.
The higher relative price for U.S. commodities
along with bulging supplies have cut farm
incomes sharply. The result is downward pressure on farmland values.
But the strengthening dollar is holding one
other key factor in check — interest rates. A rising dollar is disinflationary. It’s not necessarily
deflationary, but it sure takes the wind out of the
sails out of price increases.
This is key for interest rates. A major force
in the rise in farmland values was low interest
rates. They: 1) made it more affordable for buyers to finance purchases; 2) made farmland
more attractive to investors as returns from
“safe” investments elsewhere were pathetic; 3)
reduced sales volume as landowners delayed
selling because returns from alternative “safe”
investments were unacceptable.
It’s been assumed interest rates would rise,
flipping all the above. The strong
Monthly U.S. Dollar Index
dollar changes the outlook. The
Federal Reserve has indicated
its desire to lift short-term interest rates to normalize the market. The markets have priced in
an interest rate rise.
With the strong dollar providing downward pressure on inflation, the Fed may spike its plans
in order to keep the economy
from tipping backwards into
negative growth — even deflation. This would keep interest
rates relatively low for much
longer than expected and help
temper the correction in farm© Barchart.com Inc.
land values currently underway.
Market Feel: Softer with Occasional Upward Bounces
While the farmland market is softer, that’s not
the case in every sale. We are well aware of auctions that are called “no sale,” but then we come
across auctions that are very strong. Sometimes
this occurs in the same geographical area.
Northwest Iowa, for instance, has recorded
some auctions of $12,000 to $16,000 an acre. But
at the same time, others ended as “no sales.”
Southeast Minnesota has been soft for two years,
with prices for quality ground struggling to
break $8,000 an acre. Then there’s an auction
that averaged nearly $9,300 an acre across nearly
225 acres.
There have been similar stories out of Illinois.
Some auctions in central Illinois range from “no
sale” to $14,000 an acre, with $11,000 more common. And then a few counties south, a couple of
auctions have pulled $16,000-plus an acre.
The quality of ground offered makes a difference, obviously. But there is still pent-up demand
for the “right” piece of property in pockets across
the Midwest.
Strong Demand Seen at Western Kentucky Auction
Bidding proved aggressive at a March 10 auction in western Kentucky, which saw nearly 452 acres pass under the
gavel. It’s rare that large properties of quality farmland
become available in any market — especially so in western Kentucky.
The offered ground was primarily flat river-bottom cropland near Rumsey in central McLean County. The farmland is subject to seasonal flooding.
The farm was sold subject to a cash lease in place for
2015 at $215.05 per acre, with the buyer receiving their
share at closing. The land has been limed within the past
five years.
The ground was offered in two tracts and was purchased
by two area farmers. Two adjoining tracts of tiled silty
loam totaling 266 acres sold for $10,300 an acre. The
remaining four tracts totaling 186 acres of untiled silty
loam cropland sold for an average of $8,285 an acre. All
four tracts were irregularly shaped. Two of the tracts,
totaling 160 acres, were split by a highway.
Two of those four tracts had Green River frontage.
However, the coal and other minerals as well as the riparian rights along the river were not included in the auction.
An older barn and farmhouse on one tract added very little value to the property, report Joe Mills and Amy Whistle
of Kurtz Auction & Realty Company, Owensboro, who
handled the auction.
Des Moines Water Works Sues Three Rural Counties
As we alerted in our Feb. 5 issue, the Des Moines Water
Works Board of Trustees unanimously voted March 11 to
sue three northwestern counties over nitrates in the
Raccoon River.
The five-member board of trustees issued notice of its
intent to sue Buena Vista, Calhoun and Sac counties in
January. It gave a 60-day period for the three counties to
solve the problem. That 60-day period expired. The board
said it was unable to make progress on the issue with
state leaders. So they voted to sue.
RESULT: The Des Moines water utility serving in excess
of 500,000 customers is suing three counties with a total
population of 40,500 or so. Seems like a fair fight. The
water works board says it has allocated a quarter of a million dollars for the lawsuit.
Having clean water is an important issue. There’s
nothing more critical. But a cooperative approach with all
parties involved is required rather than this sledgehammer approach.
The board says it spends about $1 million annually to
reduce nitrate levels to an acceptable level. No wonder
they are looking for a solution.
But after removing nitrates for consumption by its customers, the utility dumps those nitrates (at a reduced
level) back into the Raccoon River. Some legal experts
believe the utility’s lawsuit could open the utility to similar
lawsuits against it by entities downstream. The utility says
it has no other option as the removed nitrate slurry may
not be applied to soil. But farmer explanations that torrential rains in recent years are out of their control did not
seem to impact the board.
The utility also says it is unwilling to wait to see if the
recently launched Iowa Water Quality Initiative is effective in reducing nitrates in water. Farmers in the three
counties targeted by the lawsuit complain the utility has
not indicated what it thinks is the solution. But Water
Works board members have indicated they want the EPA
to enact new regulations under the Clean Water Act
(CWA) to regulate field runoff.
The CWA exempts nonpoint source discharge.
Traditionally, tile lines have been exempt from the CWA,
but no actual language states that to be the case and no
lawsuits support that position. The board believes drainage districts and tile systems are point sources because
they are designed, constructed and managed in ways that
take water away from fields and pollute waterways.
The Des Moines Water Works will now provide the case
to test that exemption.
Meanwhile, the EPA has been itching to get its hands on
regulating nearly all bodies of water in the U.S. It has tried
through aggressive regulatory actions but has been
slapped back by the courts. Its proposed Waters of the
U.S., or WOTUS, rule and accompanying interpretive rule
are its most recent attempts. The EPA is still sorting
through more than one million comments it received on
its proposed WOTUS rule. And it has been wrist-slapped
by Federal District Court for attempting to regulate rainwater runoff in West Virginia. (See EPA Ends Legal Battle
with Poultry Farmer, LandOwner Oct. 16, 2014.)
Despite those setbacks, EPA is no doubt delighted with
the Des Moines Water Works Board for handing them
this new legal attempt to extend its regulatory reach.
LandOwner is published twice a month. Copyright 2015 by Professional Farmers of America, Inc., 6612 Chancellor Drive, Cedar Falls, Iowa 50613-9985
Periodicals postage paid at Cedar Falls, Iowa. Postmaster: Send address changes to: LandOwner, 102 Mackinlay Dr., Webster City, Iowa 50595
Senior Vice President, Chuck Roth • Editor, Mike Walsten • Publisher, Chip Flory • Markets Editor, Brian Grete
Editorial Phone: 319-277-1278 • E-mail: [email protected] • Editorial correspondence: 6612 Chancellor Dr., Suite 300, Cedar Falls, IA 50613
ISSN number: 1548-2901 • Subscription services phone: 1-800-772-0023 • Subscription: $249 per year
LANDOWNER 2 / March 18, 2015
Nebraska Farmland Values Decline 3%
For the first time in recent years, the
Dryland Cropland Posts Steepest Decrease, -9% to -10%
weighted-average statewide value of
Nebraska farmland declined about 3%
as of Feb. 1, compared to a year earliNorth
Northeast
er. That’s according to preliminary
$1,300
Northwest
$6,320
+7%
results of this year’s survey of farm
$855
-2%
and ranchland values conducted by
+0%
Jim Jensen and Roger Wilson,
University of Nebraska-Lincoln (UNL)
East
Central
agriculture economists. The survey
$6,570
$3,995
indicates the weighted-average value
Southwest
-10%
-5%
of an acre of Cornhusker farmland
$2,055
State
+4%
was $3,210. The survey also found
Average
Southeast
South
$3,210
2015 cash rents decreased about 10%,
$5,875
$4,785 -1%
-3%
with declines deeper for dryland crop-3%
land than irrigated.
2014 and 2015 UNL Nebraska Farm Real Estate Market Developments Surveys
The survey shows dryland cropland
declined 9% to 10%, depending on
Farmland related to the cattle industry, however, recordwhether or not it had irrigation potential. Irrigated croped a different story. The average value of tillable grazing
land did not decline quite as sharply, according to the
land rose 7% to a statewide average of $1,490 an acre. The
survey. Center-pivot irrigated cropland slipped 2%, while
value of non-tillable grazing land rose 12% to a statewide
the value of gravity-irrigated cropland decreased 4%.
average value of $970 an acre. Hayland jumped 20% to an
Survey respondents indicate the slighter percentage
average value of $2,350 an acre.
declines in irrigated cropland versus dryland crop are due
On a regional basis, the north, which has a low percentto the generally higher and more consistent crop yields on
age of cropland to pasture and hayland, showed the stronirrigated cropland.
gest percentage gain —
up 7%. The east region,
Average Value Per Acre by District, by Land Type
preliminary data
meanwhile, which is
Land Type Northwest North Northeast Central East Southwest South Southeast State heavily dominated by
cropland, fell 10% on
Dryland Cropland (no irrigation potential)
$ per acre
665
1,580
5,750
3,185
5,920
1,835
3,540
4,945
3,385 average.
The sharpest decline
% change
-21
-8
-11
-9
-10
-7
1
-9
-9
Dryland Crop (irrigation potential)
in the two irrigated crop$ per acre
870
2,270
7,360
3,930
5,940
1,850
4,500
6,720
4,740 land
classes were
% change
-7
-5
2
-20
-21
-9
-12
-5
-10 reported in the central
Grazing Land (tillable)
district at about 14%,
$ per acre
535
1,475
3,265
2,715
4,005
910
2,565
2,900
1,490
with
slight
% change
-3
28
-20
18
11
2
6
-12
7 along
decreases in the northGrazing Land (non-tillable)
$ per acre
465
685
2,610
2,065
3,145
845
1,935
2,315
970 east, east and southeast
% change
15
10
5
24
26
5
9
7
12 districts. The northwest
Hayland
and southwest districts,
$ per acre
1,085
1,680
4,075
3,250
4,040
1,950
3,175
3,000
2,350
however, reported gains
% change
6
1
40
38
23
26
35
19
20
in the value of irrigated
Gravity-Irrigated Cropland
$ per acre
3,335
3,600
7,355
6,870
8,595
5,035
7,195
8,065
7,005 cropland. Those two
% change
10
-15
-1
-15
-2
12
-1
-3
-4 regions are major cowCenter-Pivot Irrigated Cropland*
calf producing regions
$ per acre
3,835
5,070
8,400
7,815
9,425
6,285
8,725
9,430
7,495 in the state. The record% change
2
2
-5
-13
-4
9
3
-3
-2
high profits seen for
All Land Average**
$ per acre
855
1,300
6,320
3,995
6,570
2,055
4,785
5,875
3,210 cows and feeder calves
% change
0
7
-2
-5
-10
4
-1
-5
-3 in 2014 likely contributed to the strength in irri* Value of pivot not included in per-acre value
gated cropland values in
** Weighted average
Jim Jensen and Roger Wilson, University of Nebraska-Lincoln
those two regions.
LANDOWNER 3 / March 18, 2015
INDIANA: WHITE COUNTY —
February 19: 84 acres northeast of Monticello. Tract 1: 67
acres; 64 acres tillable; corn PI
124.5; $5,970 per acre. Tract 2:
16 acres; wooded; $4,375 per
acre. Jim Hayworth, Schrader
Real Estate & Auction Co., Inc.,
Monticello, 888-808-8680.
COLORADO: LINCOLN COUNTY —
February 17: 1,670 acres 14
miles north of Genoa. Tract 1:
650 acres; 646 acres dryland
cropland; $1,732 per acre. Tract
2: 310 acres; 114 acres cropland; 150 acres CRP through
2021; wind turbine; $1,032 per
acre. Tract 3: 157 acres; 150
acres cropland; $1,909 per acre.
Tract 4: 554 acres pasture; $794
per acre. Reck Agri Realty &
Auction, Sterling, 800-748-2589.
Indiana: Orange County:
February 17: 123 acres south of
Paoli; orchard.Tract 1; 32 acres;
8 acres tillable; $1,875 per acre.
Tract 2: 92 acres; 31 acres tillable; farmstead; $3,059 per
acre. Todd Litten, Halderman
Real Estate Services,
Ellettsville, 812-876-1045.
IOWA: DUBUQUE COUNTY —
February 15: 240 acres southeast of Peosta. Tract 1: 98
acres; 92 acres tillable; CSR2
76.2; CSR 73.8 (51.3 county
average); farmstead; $11,100
per acre. Tract 2: 70 acres; 70
acres tillable; CSR2 75.9;
$11,900 per acre. Tract 3: 72
acres; 70 acres tillable; CSR2
78.5, $14,900 per acre.
McDonough Real Estate,
Monticello, 319-465-4761.
Indiana: Spencer County:
February 12: 60 acres west of
Rockport; 50 acres tillable; $6,058
per acre. Brad Horrall, Schrader
Real Estate & Auction Co., Inc.,
Vincennes, 812-890-8255.
Minnesota: Sibley County:
January 29: 144 tillable acres
south of Winthrop; CPI 88.3;
$7,369 tillable per acre. Wingert
Realty and Land Services,
Mankato, 507-345-5263.
$
Recent sales
reported to...
Here’s a listing of
recent sales reported to us by real estate brokers and auctioneers
across the country. If you have recent sales you’d like to share, call us at 319277-1278 or e-mail us at [email protected].
MINNESOTA: MOWER COUNTY — March 12: 224 acres northeast of Austin;
223 acres tillable; PI 90.8. Tract 1: 74 acres; $8,972 per acre. Tract 2: 77 acres;
$9,870 per acre. Tract 3: 73 acres; $8,986 per acre. John Kirkpatrick, Murray
Wise Associates, LLC, Champaign, Ill., 217-398-6400.
ILLINOIS: SANGAMON COUNTY — March 12: 79 acres northwest of
Williamsville; all tillable; PI 142.1 (147 maximum per Bulletin 811); $16,200
per acre. Tom Toohill, Soy Capital Ag Services, Springfield, 217-547-2885.
NEW MEXICO: UNION COUNTY — March 5: 3,960 acres south of Capulin. Tract
1; 960 acres; ranchland; $629 per acre. Tract 2: 2,960 acres; ranchland; $479
per acre. New high for northeastern New Mexico ranchland. Clift Land
Auctions, Amarillo, Texas, 800-299-5263.
NEBRASKA: CASS COUNTY — March 5: 146 acres west of Manley; 112 acres
dryland cropland; SRPG 66; $7,700 per acre. Richard Hickman, Farmers
National Company, Papillion, 888-319-3119.
IOWA: LYON COUNTY — March 5: 80 acres 3.5 miles northwest of George; 78
acres tillable; CSR2 94.5, CSR 68 (59.5 county average); $14,700 per acre.
Vande Vegte and Zomer Realty and Auction, Inc., Rock Valley, 712-476-9443.
KANSAS: THOMAS COUNTY — March 3: 320 acres southeast of Halford; 310
acres dryland cropland; $3,100 per acre. Donald Hazlett, Farm & Ranch
Realty, Inc., Colby, 800-247-7863.
IOWA: DALLAS COUNTY — March 3: 81 acres southeast of Dallas Center; 74
acres tillable; CSR2 85, CSR 78.1 (73.6 country average); long-term, not nearterm, development potential; $12,000 per acre. Terry Hobson, Farmers
National Company, Ames. 515-292-6205.
NEBRASKA: MADISON COUNTY — March 2: 160 acres southwest of Madison;
irrigated; center pivot and power unit not included; 154 acres tillable; older
farmhouse; SRPG 65.2; $8,800 per acre. Tom Sunderman, AgriSun Land
Management, Inc., Fremont, 402-727-7100.
ILLINOIS: MORGAN COUNTY — February 20: 240 acres southeast of Lynnville;
127 acres tillable, 21 acres of which is enrolled in CRP through 2016; timber
appraised at $84,000 in early 2015; $5,700 per acre. Worrell Land Services,
LLC, Jacksonville, 217-245-1618.
IOWA: O’BRIEN COUNTY — February 19: 78 acres between Hospers and
Archer; 75 acres tillable; CSR2 96.8, CSR 77.7 (71.8 county average); $15,600
per acre. Vander Werff and Associates, Inc., Sanborn, 712-729-3264.
NEBRASKA: BUTLER COUNTY — February 19: 80 acres southwest of Rising
City; 78 acres cropland; motor, gear head and pivot not included; $11,700 per
acre. Bill White, The Austin Company, Inc., Milford, 402-761-3361.
LANDOWNER 4 / March 18, 2015
Outlook Provided by Pro Farmer
CURRENCIES
Dollar surge to ‘par’ driven by euro plunge
Monthly U.S. Dollar Index
The U.S. dollar index briefly ticked above “par”
(100.00) last week. The last time the index traded
above that level was April 2003. If 100.00 turns into
support, it would signal another leg up in the dollar is
coming. To signal the dollar rally is over, the index
would have to close below the 2005 high at 92.630.
100.00
92.630
Fundamental trends
DOLLAR: The U.S. dollar and the euro are swiftly
headed in opposite directions. The greenback is supported by expectations the Fed will soon raise interest
rates. The start of the European Central Bank’s quantitative easing and renewed concerns with Greece are
pummeling the euro.
Since May 2014, the dollar has surged 26% in value.
When broken down by commodity compared to our competitors’ currencies, the strong dollar rally should have
impacted corn the most, followed by soybeans, wheat
and cotton. But USDA raised its 2014-15 corn export
forecast by 50 million bu. in its March Supply & Demand
Report. Wheat continues to be the market impacted most
by the surging dollar.
Export demand concerns limit the upside
WHEAT
Weekly SRW Wheat Futures
Key support is at $4.66 1/4. Violation of that level
would open downside risk to the 2010 low at $4.25 1/2.
Bulls need a close above $5.72 1/4 to
signal a low is in place. Even then, the
downtrend is likely to cap the rally.
$5.72 1/4
$4.66 1/4
$4.25 1/2
Fundamental trends
SRW: USDA added 1 million bu. to seed use and
with no other changes, the result was a like drop in
carryover. This surprised traders who had expected
a rise in projected ending stocks this month. But the
upside is limited by the surging dollar and concerns
with U.S. export demand.
HRW: Warm temperatures in the Southern Plains
caused wheat to break dormancy earlier than normal, which leaves it vulnerable to a plunge in temperatures. The past 10 years, July HRW futures
trended lower on average from March to July.
Barring a spring weather scare, the upside is limited.
LANDOWNER March 18, 2015 / Outlook page 1
CORN
Bigger-than-expected carryover decline fails to attract buyers
Weekly Corn Futures
The long-term downtrend from the alltime high remains the dominant chart
feature. Bulls need a close above
the downtrend and $4.17 to
signal a low is in place.
A drop below the winter
lows would leave the 2014
low at $3.18 1/4 as the
next level of strong support.
$5.22 3/4
$4.17
$3.18 1/4
$3.00
Fundamental trends
CORN: USDA surprised traders in its Supply &
Demand Report by lowering corn carryover 50 million bu., to 1.777 billion bushels. USDA also reduced
global carryover. The report was not what the trade
expected, but price action suggested there was no
conviction by traders to buy despite the bullish data.
The extreme strength in the U.S. dollar is likely off-
SOYBEANS
setting bullish fundamental drivers as traders fear
reduced export potential. Export bookings are again
trending below the 2013-14 marketing year, which
casts a slight bearish bias. Basis strengthened
slightly last week on support from light sales by
farmers, who likely want to wait for end-of-month
reports before making marketing decisions.
USDA surprisingly leaves carryover unchanged
A push above the downtrend would need to
be accompanied by a close above $10.94 1/4
to signal a low. A close above $11.86 1/2 is
needed to signal a trend change.
Weekly Soybean Futures
Support is heavily layered
from $8.78 3/4 to $7.76 1/4.
$11.86 1/2
$10.94 1/4
$7.76 1/4
$8.38 1/4
$8.78 3/4
Fundamental trends
BEANS: In its March 10 Supply & Demand Report,
USDA left its soybean balance sheet unchanged, which
disappointed traders who expected a lower carryover.
Traders are paying close attention to the dollar that sped
higher this month within a bull market since last year. It
is not the level of the dollar, but the fast pace to its rally
that may cause problems in coming months for export
LANDOWNER March 18, 2015 / Outlook page 2
sales. Also, it is the season to expect a slower export
pace as Brazil brings a record crop to market. Analysis
forecasts prices will move lower into the month-end
USDA reports as the dollar is expected to show strength
and traders dial in higher acres for the 2015 crop. Basis
is likely to show some strength as futures prices erode
and farmers wait on the March 31 reports.