Headlines:
- Weak crop prices continue to weigh on US farmland values
US farm prices are still in the doldrums, as the Goss farmland index languishes below growth-neutral, for the 33rd straight month. Low crop and cattle prices are weighing on the whole agricultural economy, said Ernie Goss, chair of Regional Economics at Creighton University. “Over the past 12 months, farm prices have fallen by 11%, cattle prices are off by 22%, and grain prices are down by 20%,” Dr. Goss said. The Goss farmland and ranchland-price index for August slumped to 25.6, down from 31.3 in July, where any number below 50 indicates prices are falling. The index has remained below growth neutral for 33 months in a row. And there looks to be ongoing pain to come, as the rural bankers forecast that farmland prices would fall by another 6.9% over the next 12 months. “However, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices, with prices growing in some portions of the regions,” Dr. Goss noted. Colorado was the outlier in the 10 rural states surveyed, as bankers turned positive on farm value prospects there. Prospects across the whole rural economic sector are looking bearish, as the overall Rural Mainstreet index remained below growth neutral for the 12th month in a row. “Weak agricultural commodity prices are pushing farm income lower and sinking the overall Rural Mainstreet economy,” Dr. Goss said.
Summary:
Several weeks ago we discussed the idea that market prices do not necessarily reflect supply and demand in a pure sense as it once did in the past. Today we live in an environment where Managed Money and large Funds can drive short term price movement. Supply and demand will typically prevail (eventually). The moves that are counterintuitive or opposite what one would expect can lead to some frustration.
On Friday we had quite the bearish report across the Ag space. The markets dropped initially but rebounded by the end of the day. Today one might have thought that a return to the fundamentals was at hand. Instead, all the markets finished in positive territory after spending much of the day under water. Funds are still net long quite a bit of Soybean contracts and they will make use of every “legal” measure at their disposal to keep prices up so that they can exit as profitably as possible. We also have shared that our time cycles models were suggesting that the downtrend was due for a pause beginning the first week of August. Rest assured that some of the top Fund Managers also use proprietary cycle models of their own. After being down as low as 996.25, Soybeans managed to finish the day at 1014.25. This tells us that the funds are not ready to surrender just quite yet.
December Corn was up 3.25 cents, November Beans was only down 1.75 cents and December Wheat was up 1.50 cents.
