DairyBusiness Update for Feb. 18, 2013
Got your fiscal year 2013 Milk Income Loss Contract (MILC) program payment “start month” established?
Brian Gould, UW-Madison dairy economist, updated projected FY ’13 MILC payments based on milk and feed futures prices at the close of trading on Feb 15. The projected payments (cents/cwt.) – down slightly from forecasts a week ago – are: January – 11.41¢; February – 33.07¢; March – 50.79¢; April – 35.09¢; May – 25.56¢; June – 16.94¢; July-September – 0.00¢.
A reminder: The “relief period” for dairy producers with annual production above the payment cap of 2.985 million lbs. and wishing to change their “start month” in FY ’13 is Feb. 1-28.
For additional information, visit Gould’s “Understanding Dairy Markets” website: http://future.aae.wisc.edu/.
Persistent drought sparked a rush in irrigated farmland sales during the fourth quarter of 2012 in the Federal Reserve Bank of Kansas City, according to Nathan Kauffman, economist and Maria Akers, assistant economist. The district covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri. Districtwide, stronger sales vaulted irrigated cropland values 30% above year-ago levels, with a 13% jump in the fourth quarter alone.
Cash rental rates for irrigated cropland also surged more than 20% from a year ago, as landowners factored in high farm incomes on land with consistent access to water. Farmers were the predominant buyers of farm real estate and placed a premium on irrigated land due to water scarcity stemming from drought. However, non-irrigated cropland and ranchland also posted strong annual gains between 20% and 25%.
After falling for four straight years, bankers reported more non-farm purchases for recreation and residential/development purposes. However, bankers noted that young and beginning farmers were having difficulties acquiring land at today’s high prices due to their holding less equity.
Interest rates for both operating and real estate loans continued to edge down. As of Jan. 1, 2013, the average interest rates for variable rate loans were 5.9% for farm operating loans, 5.71% for machinery/intermediate loans, and 5.47% for agricultural real estate loans.
Recent price weakness in both old and new crop soybean futures reflects current expectations that the 2013 South American crop will be record large and will increasingly replace U.S. soybeans in the world market, according to Darrel Good, University of Illinois ag economist. While the pace of U.S. soybean exports remained large through the second week of February, recently announced cancellations of some export sales support the expectation of a rapid decline in that pace in coming weeks. Similarly, the pace of the domestic crush remained large through January, supported by large exports of both oil and meal. The January crush as estimated by the National Oilseed Processors Association on Feb. 15 was not quite as large as expected and the pace is expected to slow as South American products become available.
The 2012-13 marketing year is just approaching the halfway point, so there is still uncertainty about how the tight supplies of U.S. soybeans will be allocated. Prices will remain sensitive to the revealed pace of consumption and South American production prospects. If the South American crop is as large as advertised, a slower pace of consumption of U.S. soybeans along with potential to import soybean products later in the year may mean that higher prices will not be required to ration remaining supplies.
MARKETS: Closed due to Presidents’ Day
Coming Wednesday in DairyBusiness Weekly:
1) Best of the West: World Ag Expo Forage Challenge winners selected
2) Prevent ‘industrial espionage’: Screen potential employees to avoid hiring animal rights activists
3) 9th Midwest Dairy Challenge draws 79 students from 19 universities to Manitowoc, Wis.
4) Dairy trade: Mixed signals… Global U.S. dairy product sales set records, but weakened in last half of 2012
5) Federal order a possibility for California dairy producers, among topics discussed at World Ag Expo
6) 37th International Osnabrueck Black & White Days results
7) 50th All-American Dairy Show anniversary line-up announced
8) Opinion: 2012 numbers are in, and it’s time for producers to stand up for change
9) Seen & Heard: Genomics are here to stay; Fort Worth results; DCRC Award nominations due; CBO baseline for dairy
10) See what’s happening on social media, listen to podcasts, and much more!
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