Corn, soybean, and wheat prices all increased throughout March due to uncertainty in Ukraine and strong fundamentals. Tension in Ukraine, the fifth largest wheat producer and third largest corn exporter in the world, greatly affected wheat and corn prices this month. Farmers in Ukraine are reportedly hoarding grain as a hedge against potential currency issues moving forward. Additionally, Crimea contains five major ports which could cause export issues in the future. Up to 20% of Ukrainian farmland may go unplanted this year due to lack of farmer funding, according to the Ukrainian Community Advisory Board.

Within the U.S., logistic problems and delays have been occurring on railroads due to the significant rail car traffic and shortage of rail cars created by domestic oil production. All railroad users are feeling the effects. Ethanol plants within the Corn Belt have been reportedly bidding over $5,000 per rail car, if even able to secure the cars for use. Additionally, temperatures have remained below average, limiting the Mississippi River thaw and usage.

Grain Prices

May corn prices surged by 8.4% throughout March and closed at $5.02 per bushel, its third consecutive monthly gain. Very strong export sales thus far in the marketing year led USDA to decrease ending stocks in the March WASDE Report by 25 million bushels to 1.456 billion bushels. On March 31st, the USDA estimated that 91.7 million acres of corn will be planted for the 2014 crop year in the U.S., a decrease of 4% year-over-year due to strong profits by planting soybeans this year. USDA also estimated 7.01 billion bushels of corn were stored in all positions as of March 1, 2014, a 30% increase from 12 months prior due to the record 2013 crop.

The May soybean contract increased again this month by 3.5% and closed at a record high $14.64. The USDA decreased ending soybean stocks by 5 million bushels in the March WASDE Report, due to increased exports. Currently, ending stocks are now estimated at 145 million bushels. Farmers are predicted to plant 81.5 million acres of soybeans this year, up 6% from 2013, due to the favorable price ratio to corn, according to the USDA's Prospective Plantings Report. Additionally, USDA stated soybeans stored in all positions as of March 1, 2014 at 992 million bushels, down 1% from 12 months prior. 

May wheat prices significantly increased this month by 15.8%, closing at $6.97 per bushel, primarily driven by the uncertainty surrounding Ukraine. In early March, USDA did not make any changes to the balance sheet of wheat in the monthly WASDE Report. USDA estimated that U.S. farmers will plant 55.8 million acres of wheat in 2014, down 400,000 acres from last year. Wheat stored in all positions was estimated 15% lower as of March 1, 2014 by USDA to 1.06 billion bushels. 

South American Crop Condition 

Estimated soybean production in both Argentina and Brazil were each increased this month by 500,000 tons to 53.5 mmt and 84.5 mmt respectively, due to improving soybean conditions, according to Oil World. Mixed conditions of very dry and very wet throughout localized regions have kept recent estimates below January 2014 estimates.

Brazilian corn has been hampered by dry weather conditions in the south and southeastern regions of Brazil, while heavy rains have impaired the second-crop corn in Mato Grosso. The Argentinean corn harvest is 7% behind where it was last year, due to torrential rains. Despite the harvesting difficulties in Argentina, expectations are high for the corn crop in 2014, due to favorable weather during growth.

Short delays are still occurring throughout Brazil and Argentina due to the lack of adequate infrastructure. Argentina's Rosario Port Authority estimates that delays will persist for several weeks due to a vessel running aground early this month.

Farmland Values

The Creighton University farmland price index decreased to 40.9 from 41.7 this month. Uncertainty over when the Federal Reserve will increase interest rates has attributed to the decline of the farmland index, which declined for the fourth month in a row. Equipment sales have declined to their lowest levels since May 2009, due to the decline in farmer income in 2013. Professor Goss stated, “Slight upturns in agriculture commodity prices over the past several months have yet to boost the Rural Mainstreet Economy. We will need to see additional increases in farm commodity prices to push the agriculture based economy back into healthy growth territory such as was experienced in 2012 and early 2013.”

Throughout spring, we have been consistently sourcing strong buying opportunities in farmland. Sellers who are trying to sell their land prior to planting are now in a rush to do so. The unofficial buying season of farmland will end as soon as farmers are able to turn their attention to planting from the farmland market.

Outlook 

Planting season is nearing and farmers have been busy preparing by making final decisions on the crop to be planted and types of inputs to use. We will closely monitor the weather as southern states will starting turning planter wheels within weeks, but any significant precipitation that occurs in late April will immediately delay planting. We also look forward to the continued thaw of the riverways to help improve domestic logistics.

Courtesy: Colvin and Company