What a difference a year makes. Last spring we were coming out of a dry winter across most of the Corn Belt, after the extreme drought of 2012. Grain stocks were beyond tight and corn was priced above $6 per bushel. Today, corn is running around $4.50 per bushel.
According to Cory Walters, University of Nebraska Extension crop economist, we entered the 2014 calendar year with plenty of corn stocks, which have kept prices down. "Over the past couple of months, demand has begun to return, index traders are buying contracts, and speculators are exiting their overall bearish positions, but the large corn crop from the past year will continue to weigh on corn prices," he said.
Walters told a group of producers at the Cornhusker agriculture economics outlook meeting in West Point recently that soybean market price estimates going into the new crop decline from 2013. Beginning stocks going into 2014 were more than last year, but less than two years ago. Demand looks to be around 7% above a year ago. Exports are also projected to be strong.
U.S. ending stocks for wheat are down, but global stocks are up. With unrest in the Ukraine, there is some uncertainty in the wheat markets because that country represents about 6% of the global wheat export market.
"The chances for losing money in the commodity markets, especially corn, are much stronger this year than last," Walters said. Market prices have dropped in the face of larger crops last season, and yield risk still exists. If we experience a large crop, there will most likely be benefits to storing grain this season and watching for forward pricing opportunities, he suggested.
Lower crop prices are part of the reason land values have stabilized, at least for the time being, said UNL Extension educator, Allan Vyhnalek. He told the group that land is still in high demand for purchase and for rent, because of its scarcity and because there aren't many other places to put cash and expect a decent return.
"But land values are predicted to deflate the bubble, not pop it like what happened in the 1980s," Vyhnalek said. "Almost half of the land sales today are cash," he explained. "Balance sheets look a lot different than they did then."
At 81%, most land sales are still to active farmers and ranchers, Vyhnalek said. And only 2% of sales went to out-of-state buyers, although the number is higher in the northern part of the state.
Cash rent levels are still quite high, he said. Rent numbers don't always trend immediately with land values, because they often lag a year or so behind. "A crop share lease is still a good, fair lease," Vyhnalek said. "Don't be afraid to enter into those leases. You might also consider flexible leases."
No matter what lease arrangement is made, communication is the key, he said. "And the first communication about a lease should not be about rental rates," he added. Look at your goals for the land.
The meeting in West Point was one of nine similar workshops also held in Hastings, Gothenburg, Sidney, Chadron, Valentine, O'Neill, Lincoln and Nebraska City. The workshops were sponsored by UNL Extension, UNL Department of Agricultural Economics, Nebraska Corn Board and Great Western Bank.