Wisconsin farmland prices soar in 2012, continuing trend
Across a five-state region that includes Wisconsin, farmland prices were up 16% in 2012, according to a recent report from the Federal Reserve Bank of Chicago.
Interest rates are low, demand for corn high, but is it enough?
By Rick Barrett of the Journal Sentinel April 1, 2013
The value of prime Wisconsin farmland continues to climb as farmers count on high crop prices and low interest rates to cover their costs for corn and soybean acreage.
With spring planting only weeks away, farmers are facing some of the highest prices for land and land rental they have ever seen.
Across a five-state region that includes Wisconsin, farmland prices were up 16% in 2012, the third-largest increase since the late 1970s, according to a recent report from the Federal Reserve Bank of Chicago.
That’s on top of a 22% increase in 2011 – the biggest jump in farmland prices in 35 years.
Fueled by a profitable grain market that includes corn to produce the biofuel ethanol, the demand for farmland has resulted in bidding wars – with some property selling for more than $10,000 per acre in Wisconsin and $20,000 an acre in Iowa.
"Perhaps the most surprising aspect of 2012′s strong gain in farmland values was that it occurred in the midst of the worst drought in the Midwest since 1988. Moreover, 2012 marked the third consecutive year of significant jumps in agricultural land values," the Federal Reserve noted.
Wisconsin farmland values increased 11% in 2012, compared with 20% in Iowa and 18% in Illinois.
That’s largely because Wisconsin farmers grow more corn and soybeans for their own livestock feed, rather than selling the crops on the commodities markets.
Even with a recent drop in price, corn remains profitable because of the drought that left grain in short supplies.
Nationwide, farmers intend to plant 97.3 million acres of corn this year, the most since 1936, according to the U.S. Department of Agriculture’s spring planting survey. Wisconsin farmers are expected to plant 4.4 million acres of corn, about the same as last year.
Rising land values have caused some worries about a potential farmland price bubble like the one seen in the 1980s, when farmers lost their land from the lethal combination of falling commodity prices, too much debt, and rising interest rates.
Today, there’s concern that the federal government could back away from raising the amount of ethanol required in gasoline and send corn prices into a downward spiral.
"There’s a lot of uncertainty on the horizon. If we move away from corn-based ethanol, that certainly would take the legs out from under the corn market. Farmland values would drop, that’s for sure," said Alex Breitinger, a commodities futures trader in Valparaiso, Ind.
But farmers are carrying much less debt now, thanks to record income from high commodity prices. The current land rush would be more worrisome if it were fueled by credit rather than cash, Breitinger said.
Overall, the farm economy is in very good shape, said Sam Miller, managing director/agriculture for BMO Harris Bank.
"There’s a lot of talk about a farmland price bubble. But the last time we experienced a big correction in land values, we had very high interest rates, and we also had loan-to-value levels that were very high. Land isn’t highly leveraged now like it was 25 years ago," Miller said.
Higher farm expenses, including land rent, could put a damper on profits this year.
Some farmers are paying several hundred dollars an acre to lease cropland this year, and there’s not as much available land as there’s been in past years.
"I have gotten a lot of calls concerning rents. It’s hard to find much for less than $100 an acre," said Kevin Jarek, a University of Wisconsin-Extension agent in Outagamie County.
With bigger farms and bigger machinery, more farmers are willing to travel farther to grow their crops – increasing the competition for buying and renting cropland.
Last year, rents jumped to $300 an acre for the most fertile ground in south-central Wisconsin.
Farmers can reduce some of their costs by doing things such as buying cheaper seed, although that could mean lower crop yields. But it’s tough for someone to get a break on land costs unless the person is buying or renting from a family member.
The cost of land, Jarek said, can determine whether a farmer makes a profit or loses money on a crop.
Statistics: Posted by yoda — Tue Apr 02, 2013 11:06 pm
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“Risk-Free” Is So 2012
by John Rubino on March 25, 2013 ·
So you’ve got this pile of cash and you’re not sure what to do with it. Nice problem, as problems go, but definitely not trivial, especially if you’re more concerned with keeping what you have than trying to make it grow.
Time was when you could simply deposit a few hundred thousand dollars or euros in your bank and relax, secure in the knowledge that even though your balance was above your country’s deposit insurance coverage limit, it was still pretty safe because your bank was, well, your bank. And no one loses money on a bank account. Even in the darkest days of the 2009 financial crisis, account holders at Citigroup and JPMorgan Chase were never seriously threatened.
That pleasant delusion ended on Sunday night when the EU forced tiny, previously insignificant Cyprus to charge large depositors for the cost of bailing out its overextended banking system – and eurozone officials hailed the plan as a template for future crises. As Britain’s Economist Magazine put it:
Coming soon to uninsured deposits near you
ON THE subject of euro zone fragility and the impact of the Cyprus incident on broader confidence in the single currency, an exhibit. Fresh off negotiating the Cyprus deal Jeroen Dijsselbloem, the Dutch finance minister and head of the “Eurogroup” of euro-zone finance ministers, said in comments to Reuters and the Financial Times that:
A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors…
In other words, Cyprus is absolutely a unique case, BUT if trouble should come to banking sectors elsewhere in the euro zone hitting uninsured depositors would seem a sensible way to go. Alternatively: rich Spaniards, Italians and so on should perhaps think about moving money in excess of deposit guarantee limits elsewhere.
And with that, equities flipped from positive to negative on the day, and European bank stocks tumbled. It could just be that traders are antsy today. But euro-zone officials should at least consider the possibility that the barrier holding back a raging contagion from Cyprus might not be particularly thick.
At any rate, one has to respect the European commitment to ensuring journalists don’t put too positive a spin on things.
The Cyprus saga contains at least two broadly-applicable lessons: First, by initially going after all bank accounts rather than just those large enough to be uninsured, Europe’s leaders gave a rare glimpse of how they really feel about private property, which is that it’s only private until the state needs it. That they backtracked in the face of public outrage (and the prospect of continent-wide bank runs) doesn’t change the fact that they’d have done it if they could have gotten away with it. Second, the revised “template,” by sparing small accounts, puts an even heavier burden on large accounts, which in some cases might be wiped out like any other unsecured creditor of a failed borrower.
So we’re left with a very different sense of what it means to have money in the bank. Small savers now know that their government will take their accounts if some future crisis makes it politically feasible. Large depositors now know that they’re unsecured creditors of extremely shaky institutions. In other words, a bank account yielding 1% is actually both riskier and lower-yielding than a portfolio of dividend paying stocks – or even a portfolio of junk bonds.
This turns the traditional risk/reward calculus on its head. Which, make no mistake, is a good outcome for the world’s governments and central banks. Cutting interest rates to zero and aggressively lowering the value of the dollar, euro and yen are intended to cause savers to become investors and investors to become speculators. The further out we all move on the risk spectrum the greater the chance that the old, indebted economies will “grow” through the next election cycle.
But turning savers and retirees into growth stock and junk bond investors means that the next 30% stock market correction (now long overdue based on charts like these) will be catastrophic for people who actually need their money. Meanwhile, in the bubbly here-and-now the same process will starve even well-run banks of deposits, since their CDs and savings accounts are now high-risk/low-return and thus not worth the trouble. The near-certain result: more banks will need bailouts, more savers will be expropriated, and more money will migrate towards risk.
The other unintended consequence of all this is — does it even have to be said? — a migration out of paper and into real assets. If there was ever a time to load up on physical gold and silver, this is it.
Statistics: Posted by yoda — Mon Mar 25, 2013 4:19 pm
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Of course I have yet to hear anyone on Wall Street thank the taxpayers of America for anything. Did Jamie Dimon or Lloyd Blankfien ever look into the camera during a congressional hearing and say-
“American people, thanks for saving our bacon in 2008. Thanks for saving us from ourselves. Thanks for the giant bonues in the years since 2008 which could not have happened if it wasn’t for all you rednecks out there in flyover country, I mean good citizens. And thanks also for the ongoing subsidy you fine Americans pay us every year, the subsidy which constitutes nearly all of the profits of the big banks. Thank you, so much.”
No, none of those guys ever said anything like that. Why? Because they aren’t thankful. They just think they’re smart.
Remember, according to Bloomberg.com, nearly all of the profits of the big banks, the second largest amount ever, is as a result of a taxpayer subsidy created when these banks became officially “too big to fail.”
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A conservative estimate from the Washington Examiner puts the total cost at $390,000,000.
I suppose it could have been far worse. Had I read that the feds spent a billion dollars last year on conferences I would not have been surprised. But when the agencies holding these parties complain about their budgets being curtailed, and restrooms at parks being closed, and lines at the airport getting longer due to lack of staff, I look at that $390,000,000 and it looms. I wonder if that number could have been halved in the name of keeping the water fountains on at Yosemite?
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Why does it seem like wherever there is human suffering, some giant bank is making money off of it? According to a new report from the World Development Movement, Goldman Sachs made about 400 million dollars betting on food prices last year. Overall, 2012 was quite a banner year for Goldman Sachs. As I reported in a previous article, revenues for Goldman increased by about 30 percent in 2012 and the price of Goldman stock has risen by more than 40 percent over the past 12 months. It is estimated that the average banker at Goldman brought in a pay and bonus package of approximately $396,500 for 2012. So without a doubt, Goldman Sachs is swimming in money right now. But what is the price for all of this “success”? Many claim that the rampant speculation on food prices by the big banks has dramatically increased the global price of food and has caused the suffering of hundreds of millions of poor families around the planet to become much worse. At this point, global food prices are more than twice as high as they were back in 2003. Approximately 2 billion people on the planet spend at least half of their incomes on food, and close to a billion people regularly do not have enough food to eat. Is it moral for Goldman Sachs and other big banks such as Barclays and Morgan Stanley to make hundreds of millions of dollars betting on the price of food if that is going to drive up global food prices and make it harder for poor families all over the world to feed themselves?
This is another reason why the derivatives bubble is so bad for the world economy. Goldman Sachs and other big banks are treating the global food supply as if it was some kind of a casino game. This kind of reckless activity was greatly condemned by the World Development Movement report…
“Goldman Sachs is the global leader in a trade that is driving food prices up while nearly a billion people are hungry. The bank lobbied for the financial deregulation that made it possible to pour billions into the commodity derivative markets, created the necessary financial instruments, and is now raking in the profits. Speculation is fuelling volatility and food price spikes, hurting people who struggle to afford food across the world.”
So shouldn’t there be a law against this kind of a thing?
Well, in the United States there actually is, but the law has been blocked by the big Wall Street banks and their very highly paid lawyers. The following is another excerpt from the report…
“The US has passed legislation to limit speculation, but the controls have not been implemented due to a legal challenge from Wall Street spearheaded by the International Swaps and Derivatives Association, of which Goldman Sachs is a leading member. Similar legislation is on the table at the EU, but the UK government has so far opposed effective controls. Goldman Sachs has lobbied against controls in both the US and the EU.”
Posted below is a chart that shows what this kind of activity has done to commodity prices over the past couple of decades. You will notice that commodity prices were fairly stable in the 1990s, but since the year 2000 they have been extremely volatile…
The reason for all of this volatility was explained in an excellent article by Frederick Kaufman…
The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities — including food — seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. “You had people who had no clue what commodities were all about suddenly buying commodities,” an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.
The money flowed, and the bankers were ready with a sparkling new casino of food derivatives. Spearheaded by oil and gas prices (the dominant commodities of the index funds) the new investment products ignited the markets of all the other indexed commodities, which led to a problem familiar to those versed in the history of tulips, dot-coms, and cheap real estate: a food bubble. Hard red spring wheat, which usually trades in the $4 to $6 dollar range per 60-pound bushel, broke all previous records as the futures contract climbed into the teens and kept on going until it topped $25. And so, from 2005 to 2008, the worldwide price of food rose 80 percent –and has kept rising.
Are you angry yet?
You should be.
Poor families all over the planet are suffering so that Wall Street bankers can make bigger profits.
Many big financial institutions just seem to love to make money on the backs of the poor. I have previously reported on how JP Morgan makes billions of dollars issuing food stamp cards in the United States. When the number of Americans on food stamps goes up, so does the amount of money that JP Morgan makes. You can read much more about all of this right here: “Making Money On Poverty: JP Morgan Makes Bigger Profits When The Number Of Americans On Food Stamps Goes Up“.
Sadly, the global food supply is getting tighter with each passing day, and things are looking rather ominous for the years ahead.
According to the United Nations, global food reserves have reached their lowest level in nearly 40 years. Global food reserves have not been this low since 1974, but the population of the world has greatly increased since then. If 2013 is another year of drought and bad harvests, things could spiral out of control rather quickly…
World grain reserves are so dangerously low that severe weather in the United States or other food-exporting countries could trigger a major hunger crisis next year, the United Nations has warned.
Failing harvests in the US, Ukraine and other countries this year have eroded reserves to their lowest level since 1974. The US, which has experienced record heatwaves and droughts in 2012, now holds in reserve a historically low 6.5% of the maize that it expects to consume in the next year, says the UN.
“We’ve not been producing as much as we are consuming. That is why stocks are being run down. Supplies are now very tight across the world and reserves are at a very low level, leaving no room for unexpected events next year,” said Abdolreza Abbassian, a senior economist with the UN Food and Agriculture Organisation (FAO).
The world has barely been able to feed itself for some time now. In fact, we have consumed more food than we have produced for 6 of the last 11 years…
Evan Fraser, author of Empires of Food and a geography lecturer at Guelph University in Ontario, Canada, says: “For six of the last 11 years the world has consumed more food than it has grown. We do not have any buffer and are running down reserves. Our stocks are very low and if we have a dry winter and a poor rice harvest we could see a major food crisis across the board.”
“Even if things do not boil over this year, by next summer we’ll have used up this buffer and consumers in the poorer parts of the world will once again be exposed to the effects of anything that hurts production.”
We desperately need a good growing season next summer, and all eyes are on the United States. The U.S. exports more food than anyone else does, and last summer the United States experienced the worst drought that it had seen in about 50 years. That drought left deep scars all over the country. The following is from a recent Rolling Stone article…
In 2012, more than 9 million acres went up in flames in this country. Only dredging and some eleventh-hour rain kept the mighty Mississippi River from being shut down to navigation due to low water levels; continuing drought conditions make “long-term stabilization” of river levels unlikely in the near future. Several of the Great Lakes are soon expected to hit their lowest levels in history. In Nebraska last summer, a 100-mile stretch of the Platte River simply dried up. Drought led the USDA to declare federal disaster areas in 2,245 counties in 39 states last year, and the federal government will likely have to pay tens of billions for crop insurance and lost crops. As ranchers became increasingly desperate to feed their livestock, “hay rustling” and other agricultural crimes rose.
Ranchers were hit particularly hard. Because they couldn’t feed their herds, many ranchers slaughtered a tremendous number of animals. As a result, the U.S. cattle herd is now sitting at a 60 year low.
What do you think that is going to do to meat prices over the next few years?
Meanwhile, the drought continues. According to the U.S. Drought Monitor, this is one of the worst winter droughts the U.S. has ever seen. At this point, more than 60 percent of the entire nation is currently experiencing drought.
If things don’t turn around dramatically, 2013 could be an absolutely nightmarish year for crops in the United States. If 2013 does turn out to be another bad year, food prices would soar both in the U.S. and on the global level. The following is from a recent CNBC article…
The severe drought that swept through much of the U.S. last year is continuing into 2013, threatening to cripple economic growth while forcing consumers to pay higher food prices.
“The drought will have a significant impact on prices, especially beef, pork and chicken,” said Ernie Gross, an economic professor at Creighton University and who studies farming issues.
So let us hope for the best, but let us also prepare for the worst.
It looks like higher food prices are on the way, and millions of poor families all over the planet will be hard-pressed to feed their families.
Meanwhile, Goldman Sachs will be laughing all the way to the bank.
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Farmers Grew Less Corn In 2012 Than Expected
04 January 2013
US – After three disappointing corn crops in a row, good yields in 2013 will be essential to rebuilding inventories, according to the latest Farm Futures magazine survey.
The extent of that effort takes shape in coming weeks, beginning with USDA’s January 11 estimates of 2012 production. The Farm Futures survey showed growers raised 10.62 billion bushels of corn on harvested acreage of 87.5 million and nationwide yields of 121.3 bpa. USDA’s November estimate put the crop at 10.725 billion bushels.
Results of the survey were released today at the opening day of the annual Farm Futures Business Summit in St. Louis, attended by more than 400 producers.
"Based on our survey of more than 1,550 growers and the government’s own certified acreage data from the Farm Service Agency, it appears production should be lower than previous estimates, said Senior Editor Bryce Knorr, who conducted the research.
"This makes good yields and large acreage crucial in 2013 to provide the corn needed by end users in the US and around the world."
Attractive profit margins should convince growers to increase plantings this spring. Producers told Farm Futures they intend to boost corn seedings to 97.75 million in 2013, a little less than one per cent more than in 2012.
"While the planting intentions we found were not as big as some predict, it was a substantial increase from our first survey in August, which projected 93 million acres," said Farm Futures Market Analyst Paul Burgener.
"The reality of another year with outstanding returns for corn convinced many growers to try more corn on corn, despite their long-term desire to return to more balanced rotations with soybeans."
As a result, the latest survey finds farmers plan to put in 76.84 million acres of soybeans. That would be a little less than the 77.2 million USDA last estimated for 2012, though more than the 76.1 million farmers responding to the survey said they put in last spring. Farm Futures estimate of 2012 production is 2.969 billion, only a few thousand bushels lower than USDA’s November projection.
"In August, our survey showed farmers ready to splurge on soybeans, increasing 2013 plantings to 78 million acres," said Knorr.
"But soybeans were trading well over $16 a bushel at the time. With new crop prices substantially lower, farmers are again focusing on total returns, giving corn the edge."
USDA issues its first survey-based forecast of 2013 spring crop planting intentions at the end of March, with a preliminary estimate put out in February at its annual outlook forum. The agency will release a survey-based estimate of winter wheat seedings January 11. Farm Futures found growers planted 42.1 million acres of winter wheat in the fall, up 1.8 per cent, with total wheat seedings for 2013 put at 57.16 million, up 2.5 per cent.
Burgener noted the latest winter wheat estimate was down 1 million from the magazine’s August survey. "While soft red winter wheat plans were unchanged, dry conditions on the Plains caused hard red winter wheat growers to cut seedings by 800,000 acres from initial intentions," Burgener said. "Those fields could wind up in corn, milo, cotton, millet, sunflowers, or soybeans depending on winter and spring moisture, another wild card the market must consider."
Farm Futures surveyed more than 1,550 growers about their plans from November 23 to December 12.
Survey results by crop:
Statistics: Posted by yoda — Fri Jan 04, 2013 12:00 pm
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2012 GM Auto Sales Worse Than Any Bush Year
I know, I know. The bailout worked and all headlines today present GM as having its best year since this and that. But here is raw data that you won’t see in many places:
? GM sold 2,595, 717 units in the Unites States during 2012; this is an 11% drop of the almost 3,000,000 units GM in 2008.
? GM U.S. sales in 2012 is lower and worse than any of the eight years Bush was in office.
? In December 2008, when the world was collapsing, when we were at the boiling point of the crisis, when we needed to save GM no questions asked, GM sold 221,983 units. How bad was it? Well, in 2012 in the midst of the great recovery, when "the bailout worked" as per Obama ads, GM sold only 245,733 units. Yes, that’s correct: the difference between the worse times for GM vs "its best months in five years," is a mere 23,750 sales!
? If you replicate this 23,750 difference for a whole year, it still does not give GM enough sales to catch up to their 2008 level.
? Total 2012 sales of vehicles in the Unites States from all firms combined were 14.5 million units. Indeed, this is better than the 13.3M units sold in 2008, but the 2012 sales are worse than all other Bush years.
? These numbers will make your liberal friends go totally crazy: Total U.S. 2012 Auto Sales (all firms combined) are up 9% from 2008, but GM is down 11% in the same period. In plain Yiddish this means the firm that got most of the auto bailout, went the other direction from the industry overall. While the industry as a whole under Obama had one year better than Bush (2012 vs 2008), GM’s best year under Obama is worse than the worst year under Bush.
Perhaps now more people will take note that the bailout was about saving over-contracted unions who ran GM finances, not the firm itself, into the ground.
Statistics: Posted by yoda — Fri Jan 04, 2013 2:15 am
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Cattle Outlook: US 2012 calf crop smaller for 17th consecutive year
University of Missouri Extension | Updated: 12/07/2012
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Through November 24, 2012 steer slaughter was down 2.4% and heifer slaughter was down 5.4% compared to the same weeks last year. Beef cow slaughter was down 12.7%, but dairy cow slaughter was up 6.2%. Year-over-year, combined cow slaughter was down 4.5%. The sharp drop in beef cow slaughter and the drop in heifer slaughter relative to steer slaughter are strong indications that America’s cow-calf operations are moving toward herd expansion. This year’s calf crop is smaller than the year before for the 17th consecutive year.
Statistics: Posted by yoda — Tue Jan 01, 2013 4:23 pm
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