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- 1. Know how. Know now.Know how. Know now. Presented by: Jessica Jo Johnson Prepared by: T. Lemmons & A. Vyhnalek Adapted from: B. Johnson. (2012). Nebraska Farm Real Estate Market Report. UNL Extension Current Land Values & Cash Rental Rates
- 2. Know how. Know now. Land Values Factors influencing Land Values Rental Rates
- 3. Know how. Know now.Know how. Know now.
- 4. Know how. Know now.Know how. Know now. 2012 Values and Recent Trends $635 22% $2425 32% $875 24% $1335 35% $2945 35% $3355 32% $4280 35% $6080 31% $4975 37%
- 5. Know how. Know now.Know how. Know now. 2011-2012 Values and Recent Trends by District Agricultural Statistics District 2011/2012 All- Land Average Value Dollars/Acre 2010-2011 % change 2011-2012 % change 5 Year % change Northwest 520/635 12.3 22 64 North 706/875 18.1 24 71 Northeast 3624/4975 25.1 37 132 Central 2183/2945 24.9 35 113 East 4625/6080 22.9 31 116 Southwest 991/1335 13.9 35 107 South 2535/3355 24.9 32 144 Southeast 3160/4280 21.7 35 120 Entire State 1833/2445 22.0 32 120 Source: Annual UNL Nebraska Farm Real Estate Market Surveys Red – 2012 values
- 6. Know how. Know now.Know how. Know now. 2011-2012 Values and Recent Trends by Land Class Type of Land – Average Value Northwest North 2011/2012 2011/2012 % Change 2011/2012 2011/2012 % Change Dryland Cropland - No Irrigation Potential 545/660 21% 800/1050 31% Dryland Cropland - Irrigation Potential 550/680 24% 1200/1625 35% Grazing Land - Tillable 340/410 21% 740/880 19% Grazing Land - NonTillable 280/330 18% 390/450 15% Hayland 550/620 13% 785/950 21% Gravity Irrigated Cropland 1980/2440 23% 2050/2625 28% Gravity Irrigated Cropland 1975/2535 28% 2955/3970 34% All Land Average 635/520 22% 706/875 24% Source: Annual UNL Nebraska Farm Real Estate Market Surveys Red – 2012 values
- 7. Know how. Know now.Know how. Know now.
- 8. Know how. Know now. Land Values Factors influencing Land Values Rental Rates
- 9. Know how. Know now.Know how. Know now. Perfect storm for land value increase •Availability of Money – profits from farming •Low interest rates •Lack of land for sale •Returns on land are still favorable, even though declined
- 10. Know how. Know now.Know how. Know now. (Source: USDA NASS, November 2012) $1.72 $7.76
- 11. Know how. Know now.Know how. Know now. $4.30 August 23rd, 2010 Corn – Dec 2012 Futures $8.09 – August 6th, 2012
- 12. Know how. Know now.Know how. Know now. Farm Commodity Prices (Source: USDA NASS, November 2012) $3.03 $9.84
- 13. Know how. Know now.Know how. Know now. Wheat – March 2012 Futures $9.62 – May 23rd, 2011 $6.57 - May 7th, 2012
- 14. Know how. Know now.Know how. Know now. Ag Exports
- 15. Know how. Know now.
- 16. Know how. Know now.Know how. Know now. Ag Exports
- 17. Know how. Know now.Know how. Know now.
- 18. Know how. Know now.Know how. Know now. Farm Income and Expenses
- 19. Know how. Know now.Know how. Know now. Nebraska Farm Income
- 20. Know how. Know now.Know how. Know now. Strength of Ag Sector 2012 Balance Sheet for the U.S. Farming Sector Total Farm Assets: $2.47 trillion Total Farm Debt: $254.1 billion Total Farm Equity: $2.22 trillion Debt-to-Equity Ratio: 8.7% Debt-to-Asset Ratio: 9.7% Source: ERS – USDA 2/2012
- 21. Know how. Know now. Income Changes Source: ERS/USDA with 2011 Forecasts UNL Estimates
- 22. Know how. Know now.Know how. Know now.
- 23. Know how. Know now.Know how. Know now. Annual Percentage of Agricultural Land Sold in Nebraska (2011-2012)
- 24. Know how. Know now. Annual Percentage of Agricultural Land Sold by County (2011-2012)
- 25. Know how. Know now.Know how. Know now.
- 26. Know how. Know now. Land Summary • State-wide – just over 50% of land purchases, with cash • At Historic Highs • Global demand for food • Rates of return are still moderate • Most believe that values are being driven in part by current producers expanding operations • Still going up? At Peak? or Declining? Depends on your local market demand • BE CAUTIOUS!
- 27. Know how. Know now. Land Values Factors influencing Land Values Rental Rates
- 28. Know how. Know now.
- 29. Know how. Know now. Value to Rent Multiple for Irrigated Cropland 7.16 13.67 5.06 11.42 0 2 4 6 8 10 12 14 16 1990 1995 2000 2005 2010 ValuetoRentMultiple Gravity Irrigated Northwest Center Pivot Irrigated Northwest
- 30. Know how. Know now.Know how. Know now.
- 31. Know how. Know now.Know how. Know now.
- 32. Know how. Know now.Know how. Know now.
- 33. Know how. Know now.Know how. Know now.
- 34. Know how. Know now.Know how. Know now. Reported Cash Rental Rates: Center Pivot Irrigated Cropland 2012 Average % Change from 2011 High Low Northwest 200 17 235 155 North 229 17 264 180 Northeast 325 16 400 264 Central 257 16 305 209 East 313 15 377 257 Southwest 236 22 285 205 South 276 18 343 220 Southeast 301 17 361 240 Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey Insufficient number of reports for Northwest Gravity Irrigated Reported Cash Rental Rates
- 35. Know how. Know now.Know how. Know now.
- 36. Know how. Know now.Know how. Know now.
- 37. Know how. Know now.Know how. Know now. Reported Cash Rental Rates: Pasture Average % Change from 2011 High Low Northwest 13 18 17 9 North 16 14 21 14 Northeast 51 9 62 36 Central 33 10 40 27 East 41 11 50 32 Southwest 15 7 21 13 South 36 13 42 30 Southeast 39 15 49 29 Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey
- 38. Know how. Know now. Cash Rent Summary • • • • • •
- 39. Know how. Know now. Questions/Comments?? Thank You
Notas del editor
- Prices inflated/deflated to year 2000
- Three- and five-year trends in values show wide variation across sub-state regions as well as by land classes The five-year all-land average percentage change ranged from 52% in the Northwest District to 103% in the Northeast and South Districts. • By land classes, both the three-year and five-year percentage changes were highest for the cropland classes while the non-tillable grassland and hayland classes experienced much more moderate gains. • For the five-year period 2006 to 2011, the value increases for the Nebraska cropland classes have averaged about 12% per year, while the non-tillable grassland class averaged about a 7% annual increase.• In contrast to the downward real estate value trends across the country for residential and commercial properties during the recent economic recession and anemic recovery, these rates of gain for Nebraska agricultural land values are phenomenal.
- Shows the average size of tract of land and sale price for the different districts. Shows the high price per acre is causing land to be sold in smaller tracts/chunks than in the past. Demonstrates that as price continues to increase, the parcels being sold off are moving in increasingly smaller “chunks”; especially eastern parcels relative to land out west.
- This slide will need to be updated at every presentation to be most current to the markets
- Nov. 5 – 7.41
- This slide will need to be updated at every presentation to be most current to the markets
- This slide will need to be updated at every presentation to be most current to the markets
- Low exports a result of lower global demand. This may be the result of the enveloping global recession and an overall lower supply of money (money being a reflection of purchasing power, not currency in circulation). More interesting is to look at who is importing product rather than who is exporting. Those countries with purchase power (China, India, Middle East, Southeast Asia) are improving import markets, while the developed countries in recession are slowing imports.
- Ending stocks this year will be the lowest in history, driving the projected price further upwards. Inverse relationship between ending stocks and price as expected in a supply and demand market system
- Low exports a result of lower global demand. This may be the result of the enveloping global recession and an overall lower supply of money (money being a reflection of purchasing power, not currency in circulation). More interesting is to look at who is importing product rather than who is exporting. Those countries with purchase power (China, India, Middle East, Southeast Asia) are improving import markets, while the developed countries in recession are slowing imports.
- Ending stocks this year will be the lowest in history, driving the projected price further upwards. Inverse relationship between ending stocks and price as expected in a supply and demand market system
- Significant expenses, especially landlords.
- Goes with net farm income slide.
- Traditionally 3% 60s-80s. At 3% every 33 years, but now 1 in 100 years
- Slide shows the decline in net annual rates of return for different production types. Reflects the explosive growth of land values and the reality that returns (both as an owner and as a renter) are not keeping pace with returns of previous years, but are on par with the disappointing returns of most markets in this latest recession “recovery”. Were high in ‘90s, due to decline in land values during early 80s and non-good commodity prices. Value stays same, but revenue increases and reduces %.
- The important item to note is that the demand for land will continue for as long as there is a readily available pool of cash or debt financing to support the acquisition price. In the past, with good crop prices and yields, many farm operations were flush with disposable cash or strong collateral balance sheets to facilitate a new purchase. This year, as crop prices were good, but yields were depressed, the pendulum will begin to swing back. This does not mean that prices will suddenly fall like a rock, but if the drought is persistent, the perception that cash reserves will shrink may lessen the free-cash demand for land. The second factor that will affect money supply is the effective interest rate on borrowed capital. Should the interest rates move up (which must happen at some point to bring the markets to equilibrium to avoid run-a-way inflation), the cost of borrowing money to finance land purchases may also lessen demand. Land will stay strong as long as cash is abundant, which will remain until return to adequate corn supply and price returns to $4 level.
- Rent * 27 = estimatedland value or Rent-to-Value of 3%This is the reverse of the rent to value ratio; simply the value to rent. So if someone were paying rent, he/she could speculate on the expected cost of owning the ground. It also demonstrates that an increasing value to rent means values are increasing faster than rent. On the rent to value side, the line would be sloped downward indicating that rents are not in keeping up with increasing land values. Simply put, although land rents are high, they are less today than 10 years ago, relative to the value of the ground. This slide is in conjunction with the one that shows that the returns for land (on all types) is decreasing. If the correlation between increasing land value and land rents were a perfect 1.0, then the line on this slide would be perfectly horizontal across time. Multiple is ~26 to determine value of that ground.
- NO NEW DATA UNTIL SEPT. of 2012
- NO NEW DATA UNTIL SEPT. of 2012Farmer survey in July and August. Are they arbitrary. Probably low due to renting from relatives and friends. Do other things that reduce rent paid.
- NO NEW DATA UNTIL SEPT. of 2012
- NO NEW DATA UNTIL SEPT. of 2012
- NO NEW DATA UNTIL SEPT. of 2012
- NO NEW DATA UNTIL SEPT. of 2012
- Farmer and Cash Rent survey is filled out by different folks. UNL cash rent survey by farm managers, lenders, professionals.
- Coffee shop has topper stories; perfect location to pay higher values; perfect storm