THE WALL STREET JOURNAL. ** Thursday, August 22, 2019 |A
The 2019 planting season
has been among the most vol-
atile in memory for many
farmers, making any insight
into the size and condition of
the coming crop more valuable
than ever. Record rainfall this
spring slowed or blocked
many farmers from planting.
That will weigh on the in-
comes of farmers who planted
less, but expectations for a
smaller harvest also pushed
up crop prices overall.
Meanwhile, trade tensions
exerted downward pressure on
prices over the past year, in-
cluding a steep slide since the
U.S. and China ramped up a
tariff fight this summer. Corn
prices rose 31% this year into
May but have since fallen 20%
as the trade fight intensified.
Overall, corn futures are
down about 7% this year at the
Chicago Board of Trade and
soybean futures are down
about 8%, thanks in part tofears that China won’t resume
buying those commodities in
bulk from the U.S. soon. Wheat
futures, hurt by factors includ-
ing bumper crops abroad as
well as in the U.S. recently, are
down 9% this year.
Many farmers say they
think President Trump’s nego-
tiations with officials in the
world’s second-biggest econ-
omy will yield a better deal for
producers of corn, soybeans
and pork despite the short-
term pain as China cuts back
on purchases of those and
other farm goods from the U.S.
“I think what he’s trying to
do with trade is justified,” said
Brian Grete, an editor with Pro
Farmer, a division of Farm
Journal.
Chinese officials last week
suggested they would stop
more purchases of U.S. farm
goods if the U.S. followed
through with its plan to levy a
10% tariff on roughly $150 bil-lion of Chinese goods by Sept.
1, down from President Trump’s
initial pledge to impose the 10%
levy on $300 billion of goods.
Pro Farmer estimated corn
yields in Ohio and South Da-
kota would be down about 15%
from last year. The outlook for
soybeans is worse. Crop scouts
counted about 40% fewer of
the fuzzy pods that hold soy-
beans in many Ohio fields this
year than in 2018.
In areas of eastern Illinois,
corn yields appear to be
roughly 30 bushels per acre
lighter than last year, according
to some preliminary data gath-
ered from Tuesday’s leg of the
tour. Yields are averaging
roughly 160 bushels per acre,
down from Pro Farmer’s aver-
age of 190 bushels in compara-
ble Illinois districts last year.
“There’s been a lot more
immature stuff than mature
stuff,” said Kyle Wendland, a
tour participant and farmer.He left 100 of his own 950
acres unplanted this spring be-
cause of heavy rainfall on his
farm in Fredericksburg, Iowa.
Field reports from the four-
day tour are adding to skepti-
cism that some farmers and
investors have harbored to-
ward nationwide estimates
from the USDA this year.
Farmers at a presentation
on the western leg of the tour
in Nebraska City, Neb., ques-
tioned whether the estimates
from the crop tour would ac-
curately reflect the poor con-
dition of some fields, said Will
Longinaker, a farmer who at-
tended the meeting.
“There were raised voices,
but it was not like anyone
cussing one another out,” said
Mr. Longinaker, who raises
corn, soybeans and cattle near
Randolph, Iowa.
The USDA’s estimates have
also drawn scrutiny. In a
monthly report last week, the
USDA estimated 90 million
acres of corn had been planted
this year, up from 89.1 million
last year. Planted soybean
acres were estimated to have
shrunk to 76.7 million this
year from 89.2 million in 2018.
“I think the USDA is under-
estimating the extent of how
bad this weather has been,”
said Paul Taylor, a former vet-
erinarian in Monroe County,
Mich., who participated in the
tour this week. He left all 24
acres on his small farm un-
planted this spring, and in-
stead put down cover crops
such as kale and radishes.
Since June, the weather in
Michigan and much of the rest
of the Farm Belt has turned
drier than usual, leaving weak
crops to fry in the sun.
“It’s either feast or famine,
where you get so much [or so
little rain] you don’t know
what to do with it,” Mr. Taylor
said.
—Jacob Bunge
contributed to this article.HENRY COUNTY, Ind.—Greg
Blanton entered a field of un-
derdeveloped corn through an
empty patch, a result of the re-
cord-wet weather this year
that kept many farmers from
planting. He picked a few small
ears and said they looked simi-
lar to the corn growing on his
own 4,500 acres across five
counties in Ohio.
“It’s got a lot of growing to
do,” Mr. Blanton said to com-
panions on an annual tour to
survey the size and condition
of corn and soybeans across
the Farm Belt. “There’s going
to be a lot of damage that’s
not going away.”
Mr. Blanton, a farmer, is
one of 125 participants making
the trip this week across seven
states from Ohio to South Da-
kota at a time of unprece-
dented uncertainty in the
Farm Belt. He and his fellow
crop scouts are counting the
density of corn and soybeans
in hundreds of fields across
the region to evaluate their
development and health, at-
tempting to forecast what pro-
duction of those top U.S. crops
will look like this year. That
will give farmers, grain traders
and food companies a better
sense of where prices and in-
comes in the farm economy
might be headed this year.
The Agriculture Department
said Wednesday it pulled
seven employees in its statis-
tics division off the tour after
one received a violent threat.
The USDA said it was working
with law-enforcement officials
investigating the incident.
Farm Journal, the company
that organizes the crop tour,
said the threat was made by
phone. “We took this threat
very seriously and have taken
all steps possible to ensure the
safety of everyone involved on
the tour,” said Andy Weber,
Farm Journal’s chief executive.BYKIRKMALTAISFarm Belt Assesses Crop Damage
Crop scouts look over corn and soybean fields during a stop in Chatsworth, Ill. A rainy spring kept many farmers in the region from planting this year.DANIEL ACKER/BLOOMBERG NEWSa bushelCornSoybeans2010 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’012345678910111213141516$Note: 2019 acreage and yield figures are projections as of Aug. 12.
Sources: FactSet (prices); Department of Agriculture (acreage and yield)Cornandsoybeanpriceshave
beenfallingforyears,as
productionsoarsandtrade
tensionscrimpdemand.Crop
acreageandyieldsare
expectedtotrendlowerin
responsetothisyear'srough
weather.Continuouscontractprice2010 ’12 ’14 ’16 ’050100150Corn
.million acres Soybeans2010 ’12 ’14 ’16 ’0255075100PlantedacreageYield,bushelsperacreSales of previously owned
U.S. homes picked up in July, a
sign that lower mortgage rates
may be finally starting to
drive sales after a weak spring
selling season.
July marked the first year-
over-year uptick in 17 months
and economists have been
somewhat puzzled why the
lowest mortgage rates in nearly
50 years, strong employment
and wages edging higher have
failed to spark more home buy-
ing. The July activity was one
of the few signs that these
forces may be starting to trans-
late into more sales.
Existing-home sales rose
2.5% in July from the previous
month to a seasonally adjusted
annual rate of 5.42 million, the
National Association of Real-
tors said Wednesday. Econo-
mists surveyed by The Wall
Street Journal had expected
sales to rise 2.3% last month.
Compared with a year ear-
lier, sales in July rose 0.6%,
the first uptick after uninter-
rupted year-over-year declines
since February 2018. Pur-
chases of previously owned
homes account for the bulk of
U.S. home buying.
Sales were up 2.7% annually
in the South last month, mak-
ing it the strongest perform-
ing region, according to NAR’s
report.
Central Florida sales have
been aided by a steady influx
of new residents, said Jeff Fa-
gan, an Orlando real-estate
agent.
Lawrence Yun, the trade
group’s chief economist, said
July’s increase was an “inevita-
ble realization given incredibly
low mortgage rates,” alongside
strong job conditions.
Other economists cautioned
against making too much of
one month’s activity, and
noted that limited inventory
andhighpricesinmanymar-
kets across the U.S. remain
headwinds.
But in Orlando, like much of
the rest of the country, there
is a drought of lower-cost op-
tions for first-time buyers.
“Right now we would still
love to see an increase in the
$300,000 and below market,”
Mr. Fagan said. “That would
be very welcome.”
A shortage of homes means
home prices remain high. The
median sales price for an ex-
isting home in July was
$280,800, up 4.3% from a year
earlier. In some large markets,
however, the median price of
lower-end homes has appreci-
ated by more than 100% since
2012, according to NAR, fur-
ther limiting the pool of eligi-
ble buyers.
There was a 4.2-month sup-
ply of homes on the market at
July’s end, but economists say
healthier inventory would
measure at least six months.
June’s sales were revised
higher, to a 5.29 million an-
nual rate from an earlier esti-
mate of 5.27 million.
News Corp, owner of The
Wall Street Journal, also oper-
ates Realtor.com under license
from the National Association
of Realtors.
BYWILLPARKER
ANDHARRIETTORRY
Home
Sales
Climbed
In July
U.S. NEWS
Borrowers took out $45 bil-
lion of these unconventional
loans in 2018, the most in a
decade, and origination is on
track to rise again in 2019, ac-
cording to Inside Mortgage Fi-
nance, an industry research
group. Such mortgages aren’t
guaranteed by government
agencies and typically charge
higher interest rates than con-
ventional loans.
The growth in unconven-
tional loans comes as the
housing market starts to show
signs of rebounding. July
marked the first year-over-
year uptick in sales of previ-
ously owned homes in 17
months.
Proponents of unconven-
tional loans argue that mort-
gages became too hard to get
in the aftermath of the crisis
and that their proliferation
will open the housing market
to sound borrowers who had
been shut out. But some worry
that the competition for cus-tomers could drive lenders to
loosen standards too much.
“It doesn’t rise to the same
level yet, to my knowledge, of
some of the things taking
place just prior to the crisis,”
said Eric Kaplan, director of
the housing finance program
at the Milken Institute. “But
we have to be vigilant.”
Unconventional loans are
largely being extended by non-
bank mortgage lenders, but
big banks have found another
way in. JPMorgan Chase & Co.,
Credit Suisse Group AG and
Citigroup Inc. have in recent
months been arranging mort-
gage bonds backed by uncon-
ventional loans.
Some $2.5 billion worth of
subprime loans, those with
FICO credit scores below 690,
ended up in mortgage bonds
in the first quarter of 2019.
That is more than double a
year earlier and the highest
level since the end of 2007, ac-
cording to Inside Mortgage Fi-nance. There was $1.9 billion
worth of subprime mortgage
bonds in the second quarter.
The market for unconven-
tional home loans is still tiny
compared with the rest of the
mortgage market as well as
the state of the industry be-
fore the crisis, when uncon-ventional borrowing peaked at
more than $1 trillion.
Still, the increase in uncon-
ventional loans shows that
lenders are looking farther
afield for customers. As the
U.S. economic expansion ages
and home prices rise faster
than incomes for most Ameri-cans, the mortgage industry is
finding a limited number of
cream-of-the-crop borrowers.
Greg Licht had a lot of busi-
ness debt and a FICO credit
score of under 600 when he
applied to refinance his mort-
gage. He also had hundreds of
thousands of dollars of equity
in the San Clemente, Calif.,
home where he has lived for
more than two decades.
That made him an appeal-
ing borrower to an unconven-
tional lender, said Tom Jessop,
a loan consultant at New
American Funding. Mr. Jessop
arranged a $675,000 loan on
the $1.1 million property, leav-
ing a significant buffer should
Mr. Licht default.
Mr. Licht was able to pull
cash out of his home and pay
down business debt. He is pay-
ing above-market interest and
plans to refinance at a lower
rate once his credit improves.
“Now my job is to work on
FICO scores,” he said.In California, home prices
have risen rapidly over the
past decade, raising concern
that much of the equity home-
owners have built up could
evaporate if market conditions
turn. Recently, the housing
market has shown signs of
cooling on the West Coast.
That is another risk lenders
must weigh.
As lenders inch back into
mortgages that got them in
trouble in the last housing
bubble, the key to avoiding a
repeat, they said, is to be care-
ful that borrowers don’t over-
extend themselves. That can
mean allowing a borrower to
have one risk—say, a low or
absent credit score—that is
offset by an area of strength.
“What we’ve been doing is
taking measured risk,” said
Tom Hutchens, an executive
vice president at Angel Oak
Mortgage Solutions , one of
the biggest providers of un-
conventional loans.The risky mortgage is mak-
ing a comeback.
More than a decade after
home loans triggered the
worst financial crisis in a gen-
eration, the strict lending re-
quirements put in place during
its aftermath are starting to
erode. Home buyers with low
credit scores or high debt lev-
els as well as those lacking
traditional employment are
finding it easier to get credit.
The loans have been re-
branded. Largely gone are the
monikers subprime and Alt-A,
a type of mortgage that earned
the nickname “liar loan” be-
cause so many borrowers
faked their income and assets.
Now they are called non-quali-
fied, or non-QM, because they
don’t comply with postcrisis
standards set by the Consumer
Financial Protection Bureau
for preventing borrowers from
getting loans they can’t afford.
BYBENEISEN
Risky Mortgages Rise Decade After Crisis
$45B
Amount of unconventional
loans taken out in 2018