After setting records in 2011 and 2012, profits should be healthy again in 2013

A trifecta of strong exports, low interest rates and higher productivity should produce continued healthy agricultural profits in 2013, a Chicago Federal Reserve Board economist told a group of 200 farmers in Decatur, Ill., earlier this week.

“Agriculture should be healthy” in 2013, says David Oppedahl, a business economist in the Chicago Fed, noting that profits levels set records in 2011 and will again in 2012. “The lingering effects of the drought could cause some issues, although we could expect world trade to pick up more, and that could help to boost agriculture’s profits.”

Speaking at the Farmland Value and Leasing Conference this week, Oppedahl said it’s necessary to look to the 1970s to find agriculture returns as high as they have been for the last two years. Thanks to federal crop insurance payments, 2012 profits are expected to exceed 2011 levels, even after accounting for inflation.

“When you account for everything together for agriculture, the finances are in pretty good shape. The two best years in the last 30 to 40 are right now,” Oppedahl said, including the dairy and livestock industries in the equation. The USDA has predicted record farm incomes for this year.

Risks to Forecast

The economist added several caveats to his forecast. A divided federal government needs to act soon to prevent the economy from going over a “fiscal cliff.” Europe could fall into a recession given its precarious financial situation. And an unexpected event could derail current high demand for corn and soybeans.

Nevertheless, he counts on agriculture to have a good year in 2013. Corn and soybean yields, he said, should return to normal. Crop prices may seem high today, but they were higher in the 1970s and 1980s after adjustments for inflation. “We have seen these crop prices before. We just haven’t seen them in nominal terms. It’s really nothing new to agriculture.”

In the meantime, the economist is counting on strong world demand for U.S. agricultural products to continue. “Trade is expected to grow in agricultural goods, even if there been some slowdown in other areas. Certainly the trend has been very positive, and the U.S. has maintained a positive balance in agricultural trade. That’s something that will help boost us next year.”

Agriculture accounts for about 9% of U.S. exports. Foreign growth has slowed recently, dampening demand for U.S. goods. But Oppedahl expects world growth to rebound next year, “rising above 4% again after dropping down closer to 3% this year.”

A weak dollar helps the export situation. The dollar’s value peaked in 2002 and has been dropping ever since, with occasional temporary upticks. “We’re in the range underneath where we were 20 years ago. We’re not seeing the dollar’s benefit being as strong, which actually benefits exports. When you denominate the sale in dollars, people are able to buy that more easily, when the dollar is weaker.”

What’s Up with Farmland Values?

In the meantime, farmland values continue to rise, particularly in the Midwest, where Fed surveys show a 20% increase in the last year. The rate of increase slowed to 15% in the second quarter. Adjusted for inflation, farmland values in the Midwest are higher than they were in the mid-1980s, the last time they peaked. “It doesn’t seem like there’s a tremendous slowing,” he says.

By: Boyce Thompson, AgWeb.com Editorial Director

Read More: http://www.agweb.com/article/fed_economist_predicts_healthy_agriculture_profits_in_2013/

Last week’s rainfall slowed harvest progress as some areas of the state received heavy showers.  Corn harvest is nearing completion as 89 percent of the crop has been harvested – well ahead of last year and the five-year average.  By area, both the north and central portion of the state have 87 percent harvested while the southern region is 95 percent complete.  The average moisture content of the corn is 18 percent.

Soybean harvest is also 89 percent complete, slightly ahead of last year and on pace with the five-year average.  Bean harvest is 91 percent complete in the north, 89 percent in the central region and 87 percent complete in the south.  The average moisture content is 13 percent.

Ninety-three percent of the winter wheat acreage has been planted and 72 percent is emerged.  Seventy-two percent of the crop is rated good to excellent compared to 68 percent last year.

Soil moisture continues to benefit from the late season rainfall as 88 percent of the top soil and 61 percent of the sub soil moisture is rated surplus to adequate.

By: Meghan Grebner

http://brownfieldagnews.com/2012/11/05/both-corn-and-soybean-harvest-winding-down/

Fertilizer prices may actually decrease next season, while land, fuel and crop protection prices are expected to trend higher.

For the past decade, the single largest contributing factor to higher on-farm expenses has been hikes in input prices. The USDA National Agricultural Statistics Service (NASS) reports the prices-paid index for production items, interest, taxes and wage rates has risen 82% since 2002.

Whether input prices go up or down in 2013, Larry Mussack says he is prepared. He buys inputs throughout the year and evaluates prices through what he describes as a large window of opportunity.

“This year I purchased half of my anticipated 2013 nitrogen in July anddecided to wait until later in the year to buy the rest of my nitrogen and other fertilizer,” says Mussack, who grows corn and soybeans near Decatur, Neb. “Right now that looks like a good move,” he adds.

Farmers who aren’t proactive pricing inputs might still luck next season. Economists expect land, seed, fuel and crop protection product prices to increase only slightly this coming year, says Steve Johnson, Iowa State University (ISU) Extension farm management specialist.

Fertilizer. After a 30.2% jump in fertilizer prices in 2011, farmers will probably be thrilled to hear that fertilizer prices for 2013 might actually decrease, says Gary Schnitkey, University of Illinois Extension farm management specialist.

Harry Vroomen, vice president of economic services for The Fertilizer Institute, says fertilizer prices are tricky to forecast because they are affected by numerous supply and demand factors. Supply factors include energy and raw material costs, transportation costs and the value of the U.S. dollar. Demand factors, particularly globally, have a significant impact because 88% of nutrient demand is outside the U.S.

Vroomen expects U.S. farm demand for nitrogen to be flat to down 1% and phosphate and potash demand to remain stable or even drop up to 4% during the next year.

By: Rhonda Brooks, Farm Journal Seeds & Production Editor

Read More: http://www.agweb.com/article/input_prices_to_stay_steady_go_slightly_higher_in_2013/

Precision agriculture – using computers to manage farm inputs and yields down to the micro-level – certainly holds strong promise for farmers. The problem is that the experience of using it often turns out to be something less than idyllic.

Brian Watkins, who farms 7,000 acres of corn and soybeans near Kenton, Ohio, really likes that his precision ag system gives him yield information as he harvests. When he marries that data with soil conditions, the result shows him the big influence soil conditions have on production. He can adjust inputs accordingly.

“We’ll drive across the field and go from a yield of zero to getting more than 200 bushels an acre,” the sixth-generation farmer told an audience at Farm Futures America in San Francisco last week. “Really, it’s a soil issue. Soil can vary within 100 feet.”

The problem is system upgrades undermine Watkins’ historical data. Each time he buys a better system, he must install different base stations. The geographic co-ordinates shift slightly “and the data suffers. We thought we could create permanent boundaries,” he said. “That has not worked out for us.”

Watkins, who has five employees, was an early adopter of precision ag. He began yield monitoring and variable-rate fertilizer applications in the mid-90s. He added auto steering in 2004, with the hope of creating AB lines in his fields to reduce operator error. He hoped operators wouldn’t drive over or hit crops.

“That hasn’t been the case,” said Watkins. The reason? Tractors with auto steering pull implements that don’t follow perfectly. Even today, operators must continually adjust for the piece of equipment behind them.

Though precision ag has drawbacks, it creates advantages that Watkins wouldn’t want to farm without. Auto steering, for instance, allows him to more effectively operate equipment at night. Watkins, like his father before him, has always planted at night to reduce his planting window. There is value to that, he said. “You can take planting down from 7.1 days to 5.6.” (See analysis below)

Enhanced agronomy may be the various systems’ ace in the hole. Watkins, who recently completed an MBA at Ohio State University on how to create value with technology, relies heavily on soil maps that show him variable lime rates in his soil. He strives to keep the optimum pH between 6.4 and 6.8. Scouts also can mark problem areas in fields.

But the big payoff may be in tracking the influence of drainage, since the Watkins farm typically deals with too much water, not too little. Watkins said his father always knew that he should put in more drainage tile. Precision ag quantifies the benefits of tile; He sees the yield variations between tiled and untiled ground, which makes drainage investments a no-brainer.

Precision planting is another feature that Watkins wouldn’t part with. Soil conditions vary dramatically on his farm. “We want to use the minimum planter down pressure to put the seed in the ground…. It makes a huge difference,” he said.

Fertility calculations are another paradigm shift. The most productive soil, Watkins said, often has the lowest fertility rate. “That’s because it produced a lot more; now all the nutrients are gone.”

Like many in the industry, Watkins dreams of the day when farmers share their data to produce the ultimate precision farming data base. The problem, he said, is that a lot of farmers are afraid to part with their data, since it is the heart and soul of their operation. Plus, much of the data isn’t any good, if the equipment wasn’t calibrated correctly. Watikins said it is hard to make calibration a priority when other more important things go wrong — like a planter or combine that doesn’t operate. Even so, he said, “the promise of great data is still there.”

By: Boyce Thompson, AgWeb.com Editorial Director

Read More: http://www.agweb.com/article/farmer_highlights_precision_ag_benefits_drawbacks/