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Economists predict land value rally will continue 
 
Market Analysis
By Karl Setzer
 
According to data from the Federal Reserve Bank in Chicago, land values across the U.S. Corn Belt have made a considerable rally in the past year. According to bank figures, farmland in the heart of the Corn Belt from April 2021 to April 2022 appreciated 23 percent in value. Rent on farmland has also increased by a reported 11 percent on the year. Economists believe this rally in farmland will continue as demand for available acres has not slowed. The greatest increase in land values was seen in Iowa with a 28 percent appreciation.
The latest update on the current La Nina from the Climate Prediction Center shows conditions are forecast to last through the entire U.S. growing season. According to the CPC, there is now a 58 percent chance the La Nina will still be active from June through October. The CPC also believes there is a 61 percent chance the La Nina will last beyond that time frame. Not only will this be a factor for the entire U.S. growing season, but likely the start of the next production season in South America as well. 
We are starting to hear mixed opinions on the U.S. export paces for corn and soybeans. Total U.S. corn export commitments are at 92 percent of the yearly forecast from the USDA, which is 2 percent behind where they usually are for this time of year. Soybean commitments are above the level that was set by the USDA for the year, but we are seeing hesitation to adjust the yearly projections higher at this time. This is from thoughts U.S. export sales are going to slow as the United States sees ongoing competition from South America and worries that we may see some bookings canceled if global consumption declines, especially in China.
We are seeing just as much confusion over projected wheat demand with just a few weeks left in the marketing year. The USDA bumped their export forecast 20 million bu (mbu) higher in last week’s balance sheets, even though cumulative sales continue to fall behind the previous yearly projection. This is the result of the Census export data which shows higher sales than the weekly USDA reports indicate. The Census data is what will ultimately determine ending stocks.
Even with today’s elevated futures values we are seeing very attractive basis levels across the United States, with some significant pushes being paid for immediate deliveries. This has not been uncommon in soybeans as crush margins remain very attractive and processors want as much coverage as possible to lock these in. We are now seeing significant pushes for corn with some buyers in the U.S. Plains paying premiums of $1.00 per bushel over futures’ values to encourage selling. This is the result of the poor pasture conditions in this region and the unlikely availability of wheat for feed.
As the U.S. planting season progresses, we are starting to see some adjustments to acreage estimates. One well-followed group has reduced their soybean acreage by 2 million from the March planting intentions report and made an equal increase to U.S. corn plantings. This is the result of better return projections on corn and the rapid planting activity on corn once farmers were able to get into fields. There is also a general belief that the March intentions were not very accurate to begin with. This could set the market up for a surprise in the June 30th revisions report, and more than negate the lower yield per acre prediction the USDA made on corn.
We are also starting to see some adjustments made to the Ukraine corn production forecast. At the start of the Ukraine war with Russia it was thought corn plantings and production this year would be minimal. We are now hearing more optimism on production with some sources predicting planted acres at 12.5 million and a total corn crop of 25 to 30 million metric tons (mmt). While this is down from last year’s 42 mmt corn crop in Ukraine, it is nearly twice what was earlier projected.
Inflation remains one of the most influential factors in today’s marketplace. Last week it was announced the Personal Price Index was up 11 percent from a year ago. The 30-year mortgage rate has climbed to 5.3 percent as well, the highest it has been since 2009. Even with this hike in interest rates, loan applications in the first week of May were still up 5 percent on the year. Economists are taking this as a sign consumers in the United States still have adequate cash to spend.
One reported measure the United States may be taking to ease inflation is the reduction of tariffs against our largest trade partner, China. President Joe Biden has indicated he may be considering this measure in an effort to open trade and ease economic stress on both parties. Economists claim that if the United States would move forward with reduced tariffs, it could drop inflation by 1 percent. While this might not seem like a significant amount, it may lead to an overall correction if trade volumes increase.
RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.

6/14/2022