Tag Archives: successful
Iowa Land Values Hit Plateau — Survey
Jeff Caldwell 09/20/2013 @ 2:35pmMultimedia Editor for Agriculture.com and Successful Farming magazine. Farmland in three of Iowa’s nine crop reporting districts saw a downturn in value in the last six months, according to the latest Iowa Realtors Land Institute (RLI) survey of land values, the results of which were released this week. Land in the northeast, southwest, and west-central parts of the state saw the upward trend in values turn into the red, however slightly: Farm ground in the northeastern part of the state was 0.7% lower in value compared to six months earlier, while land in the other two areas was 0.5% lower, according to the RLI’s survey of ag lenders around the state. “The results of these surveys show a statewide average increase of cropland values of 1.2% for the March 2013 to September 2013 period. Combining this increase with the 9.4% increase reported in March 2013 indicates a statewide average increase of 10.6% for the year from September 1, 2012, to September 1, 2013,” according to a report from Kyle Hansen of the Iowa Land Realtors Institute. “The nine Iowa crop reporting districts showed a mixed response. The districts varied from a 5.0% increase in EC district to a -0.7% decrease in NE district since March 2013.” Farmland values in Iowa, according to the most recent Iowa RLI survey of that state’s farm managers and ag lenders. (Chart courtesy Iowa RLI) Grain prices and interest rates — two factors that have been seen as drivers of a wider-scale easing of the climb in land values across the Corn Belt — are also to blame for the relative easing of values in Iowa, Hansen adds. “Factors contributing to current farmland values include: lower commodity prices, increase in long-term interest rates, and 2013 growing conditions,” he says. “Other factors include: lack of stable alternative investments, large amount of cash on hand, and limited amount of land on market.” Continue reading
Farmland Ownership Trends Shifting
Jeff Caldwell 08/06/2013 @ 9:15amMultimedia Editor for Agriculture.com and Successful Farming magazine. As farmland values have climbed over the last few years, it’s caused a slowing in a couple of key trends in who owns that land, shifts that could ultimately affect land accessibility for young and beginning farmers, according to one Iowa land values expert. Every five years, Iowa State University Extension farm management specialist Mike Duffy conducts a survey of farmland owners in his state. The survey has been conducted since the early 1980s, a time period that’s seen some major ups and downs in the land market. “The latest Iowa farmland ownership survey is compared to previous surveys dating back to 1982, during the time when farmland values first started collapsing after the boom of the 1970s,” Duffy says, adding that the full results of the survey will be released later this fall. “Looking at the various surveys over the past 30 years shows some of the changes in farming technology, demographics, and other patterns. The 2012 survey also shows the impact of the current land boom on these trends.” The sharp climb in land values since the last land ownership survey conducted in 2007 — a time when values in Iowa had more than doubled — has caused a couple of shifts in ownership that could carry implications for young and beginning farmers in the coming years, provided values are sustained. First, who’s owning the land? Last year, almost one third of Iowa farmland was in the hands of someone over the age of 75. That number has been ticking up since 1982, but just in the last five years since the sharp value climb, Duffy says there’s been a noticeable change. “The percent of land owned by people in this age category had been steadily increasing since 1982, when 12% of the land was owned by someone over 75 years old. The trend toward increasing age does appear to have been slowed by the boom,” Duffy says. “There are younger owners, although they represent a small percentage of the acres. Over half, 56%, of the farmland in Iowa is owned by someone over the age of 65.” Absentee land ownership has also declined in the last few years since the runup in land values. In 2012, 21% of the farmland in Iowa was owned by an absentee owner. That’s the same as in 2007, but up 15% from 1982. Duffy says the flattening of this number could also foreshadow a major trend shift. “Another trend that seems to have slowed is the percent of land owned by people who don’t live in Iowa full-time,” he says. “It appears that the higher land values had an impact on the ownership by non-Iowans.” These trends are important for all parties involved in farmland ownership and management, but mostly for those on the opposite ends of the age spectrum, Duffy says. This makes it important for those parties to watch them closely and take them into account in land purchase and lease agreements down the road. “Ownership of Iowa’s farmland and access to the use of the land is critical for the future of the State. The impact of the ownership on both beginning farmers and the retiring farmers will be crucial,” Duffy says. “The current situation with respect to farmland ownership in Iowa is a good topic for discussion among landlords, family or heirs, and agribusiness professionals.” Continue reading
Have Farmland Values Seen Their Top?
Jeff Caldwell 08/16/2013 @ 2:21pmMultimedia Editor for Agriculture.com and Successful Farming magazine. Corn and soybeans aren’t worth as much as they were a year ago. That’s got some farmers staring down the barrel of a breakeven price for corn and soybeans that may not be attainable based on current prices for the crops and the inputs it will take to raise them. And much of the expense side of the equation adding up to that necessary price comprises farmland. Ask a lot of farmers about the prospect of lower land costs in the coming year or so and many see that as an almost laughable scenario. Land prices simply haven’t fallen even though current levels make it tough to yield a profit on corn and soybean acres. In other words, $4.25 casn corn and $300/acre land rent don’t mix very well. “Ha! They should go down, but will they? I don’t think so,” says William Bruere, who with his family operates Bruere Farms near Prole, Iowa. “Despite lower farm income and expectations of additional declines, farmland values surged further during the second quarter. Irrigated cropland values in the District jumped 25% from a year ago. Nonirrigated cropland values advanced 18% from the previous year, a slightly slower pace of growth than in the first quarter,” says Nathan Kauffman, economist with the Federal Reserve Bank of Kansas City in a report released this week. But, farmers say lower grain prices make up just one piece of the land price crunch. One other element lies outside the farm sector; as long as investors have reason to remain anxious about the general equities market, it’s enough to keep capital streaming into land. “Crop prices are not the only thing supporting land values, but is one of them. Cheap money in the form of low interest is another,” says Agriculture.com Farm Business Talk veteran advisor sw363535 . “Federal borrowing and dumping of cash into the economy has helped the stock market values as much as grains prices. “If land prices do not come back down with the grain prices, it is not a good omen for the rest of the economy. Some of the Value of farm land has been fear-driven…or at least lack-of-faith driven.” This movement in land comes despite widely documented lower farm incomes based on lower grain prices that Kauffman says have driven higher farm loan volume in recent months. “Lower farm income boosted operating loan demand and hindered loan repayment rates in the second quarter. According to survey respondents, operating loan demand rose to its highest level in more than two years,” he says of the Fed’s most recent survey of ag lenders. “Loan repayment rates improved modestly, but bankers expected repayment rates to fall in the future with weakening farm income.” History — not necessarily specific conditions right now — sides with sw363535 ‘s assertion about the need for land prices to slip. Farm Business Talk senior contributor and farmland investor rswfarms says based on almost 80 years of data in Iowa, a trend of return on land investment of 4% to 6% has remained intact. It’s fluctuated from as much as 15% to as little as 1%, he says, but it’s always circled back to that average range for a normal corn-soybean rotation. “Currently for Iowa cropland growing corn and soybeans, with average yields, a $14,000/acre land cost, and a corn and soybean cash price of $4.25 and $11.50, the ROI ratio is in the 3% to 3.5% range. This is on the low end of the 75-year average, so if all things stay the same for the 2013 crop year it would not surprise me to see maybe a 5% decline in values for the 2014 fiscal year to get back to the average ROI ratio of 4% to 6%,” rswfarms says. “Personally, I see land leveling out for the rest of 2013, with the total 2013 appreciation rate being around the 18% to 20% rate. In 2014, with again normal yields and prices at $4.25 corn and $11.50 soybeans, a 5% decline could be in the cards for the fiscal 2014 year. Could we see another mid-1980s farmland crash where Iowa farmland went from $5,000/acre down to $850/acre for the best 80+ CSR dirt? No, I don’t see that happening and I will back up my statement by betting a 12-pack of beer.” Some ag lenders agree that the time is nigh for a downturn in land prices. In his survey, Fed economist Kauffman says while many see more of a leveling-off in land values in the near term, the number of those seeing a trend lower is growing. And, his data confirm rswfarms ‘ idea that the slide won’t amount to much if it does reach fruition. “While most bankers expected farmland values to remain at current levels, an increasing number of respondents felt farmland values may have peaked. Compared with previous surveys, fewer bankers expected farmland values to keep rising. More bankers also expected farmland values to drop after harvest likely due, at least partially, to expectations of lower farm income,” Kauffman says. “Among bankers anticipating a decline, though, a majority estimated farmland values would fall less than 10 percent during the next year. Very few bankers expected that farmland prices would drop more than 10%.” But, will this all happen? Will land values proceed to turn lower in the near future? Though the numbers indicate they should and will, farmers say they have little reason to believe they will see lower values and rents in the next year. “I’m willing to bet that any good land for sale would bring prices right around what we’ve seen in the past couple of years. That is, I don’t have any reason to expect a decline in value in the near future,” says Farm Business Talk veteran advisor Jim Meade / Iowa City . “The county sure doesn’t think so; my taxes have gone up again.” Continue reading
