Iowa farmers dealt with ‘double-whammy’

Author: Kristy

Second year of drought and plunging prices for corn and soybeans

Iowa farmers took a two-edged hit from the drought, as well as low market prices, last year, according to David Oppedahl, an agriculture economist with the U.S. Federal Reserve District 7 office in Chicago, who talked about land values.


February 27, 2014 7:00 am  •  By Jim Offner

WATERLOO | Iowa farmers can look to bounce back from a “double-whammy” that hit them — and land values — in 2013, according to economist David Oppedahl of the U.S. Federal Reserve.

The twin hit came in the form of a second year of drought and plunging prices for corn and soybeans, said Oppedahl, an agriculture business economist with the Fed’s 7th District in Chicago, who spoke at the Money Smart Ag Conference on Tuesday at Hawkeye Community College.

Whether they can bounce back depends on several factors still to be determined, he said.

“Certainly, the commodity markets will be a strong driver of whatever direction farmland moves,” Oppedahl said. “Right now, we’re in a bit of a waiting game.”

A big harvest could lead to some downward pressure on lower-quality land.

“Productivity is a key component on farmland values,” he said.

According to survey respondents from 186 agricultural banks across the Fed’s District 7 — which includes all of Iowa and portions of Wisconsin, Michigan, Illinois and Indiana — agricultural land values rose 3 percent from the third quarter to the fourth quarter of 2013. Most respondents anticipated farmland values to remain stable from January through March, with the rest expecting decreases, Oppedahl reported in the latest issue of his agricultural newsletter.

Good farmland values in District V, which includes the Cedar Valley, were up 3 percent over all of 2013 but slipped 4 points between Oct. 1 and Jan. 1.

Overall, the district’s crop production bounced back strongly from the 2012 drought, but drought returned to the Midwest in 2013, hitting Iowa the hardest among District 7 states, Oppedahl said.

According to USDA, the district’s corn yield surged 42 percent in 2013 from 2012 to 169 bushels per acre, the third-highest level on record. In addition, soybean yield moved up 7.5 percent in 2013 from 2012 to 46.9 bushels per acre.

Iowa’s corn production, on the other hand, was only 15 percent higher in 2013 than the previous year, compared to increases of 63 and 74 percent, respectively, in Illinois and Indiana.

Iowa’s soybean production was 0.8 percent lower than in 2012.

“A second straight year of drought limited Iowa’s output,” he said.

Iowa dealt with harsher dry conditions than neighboring states, so it was hit harder, Oppedahl said.

Outbreaks of the PED virus, which kills young pigs, have been a factor in rising pork prices heading into the “spring-Easter ham season,” he said.

“I think there’s going to be anticipation of additional need for hogs in the coming months,” Oppedahl said. “With cattle, your continuing drought situation in the South and Plains and even into Iowa has lowered the cattle herd and made it so there’s need for higher prices to lower the demand.”

Global interest in U.S. beef has firmed up prices, too.

Oppedahl also advised conference attendees to watch for rising interest rates as the Fed pares back its bond purchasing.



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