Transcript Slide 1

John Deering
Agriculture and Business Management Specialist
Colorado State University Extension
2012 Crop Insurance Workshop
October 30th, 2012
2,500
Dollars per Acre
2,000
1,500
1,000
Nominal
500
Inflation
adjusted
0
1960
Agriculture &
Business
Management
1970
1980
1990
2000
2010
Source: USDA, National Agricultural Statistics Service
Inflation adjusted using GDP Chain-type deflator, 2005 = 100
10
10
AAA
Dow
S&P 500
Jones
Treasury
Farmland
6
8
Mean Return (%)
Mean Return (%)
8
4
1970 - 2011
2
2000 - 2011
Farmland
6
AAA
4
Treasury
Dow
Jones
2
S&P 500
0
0
0
5
10
15
Standard Deviation Return (%)
20
0
5
10
15
Standard Deviation Return (%)
Source: USDA, National Agricultural Statistics Service, St. Louis Federal Reserve
AAA = Moody’s Seasoned AA Corporate Bond Yield, 10-Year Treasury Constant Maturity
Agriculture &
Business
Management
20

Recent high net returns from farming

Low interest rates
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1031 Exchanges

Pension funds
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Neighbors
Agriculture &
Business
Management
2,500
140
Real Estate
120
Net Cash Income
2,000
1,500
80
60
1,000
$/Acre (2005)
$/Acre (2005)
100
40
500
20
0
0
1990
Agriculture &
Business
Management
1995
2000
2005
2010
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator
Source: USDA, National Agricultural Statistics Service, Economic Research Service
2,500
140
Real Estate
Net Cash Income
100
1,500
80
60
1,000
$/Acre (2005)
$/Acre (2005)
2,000
120
40
500
20
0
0
1990
Agriculture &
Business
Management
1995
2000
2005
2010
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator
Source: USDA, National Agricultural Statistics Service, Economic Research Service
2,500
8.00
Real Estate
7.00
Interest Rate
6.00
5.00
1,500
4.00
1,000
3.00
Percent
$/Acre (2005)
2,000
2.00
500
1.00
0
0.00
1990
1995
2000
2005
2010
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator
Source: USDA, Economic Research Service, St. Louis Federal Reserve
Agriculture &
Business
Management
Agriculture &
Business
Management
2nd Quarter percentage changes from 1 year prior
2007
2008
2009
2010
2011
2012
Agriculture &
Business
Management
12.5%
18.3%
0.4%
4.8%
21.3%
26.4%
Source: Federal Reserve Bank of Kansas City
Tenth Federal Reserve District (Quarterly Agricultural Credit Survey)
CO, KS, NE, OK, WY (NM, MO)
2nd Quarter percentage changes from 1 year prior
$1,000 in 2006
2007
12.5%
2008
18.3%
2009
0.4%
2010
4.8%
2011
21.3%
2012
26.4%
$2,147 in 2012
Agriculture &
Business
Management
Source: Federal Reserve Bank of Kansas City
Tenth Federal Reserve District (Quarterly Agricultural Credit Survey)
CO, KS, NE, OK, WY (NM, MO)
Year
Farmland
2006
$1,000
$1,000
$1,000
2012
$2,147
$1,237
$9,898
Agriculture &
Business
Management
S&P 500
(Adjusted)
Apple Inc.
Source: Woulda coulda shoulda
6.0
2.0
5.0
1.5
4.0
3.0
Cropland
2.0
Pastureland
1.0
0.5
1.0
0.0
0.0
1998
Agriculture &
Business
Management
2000
2002
2004
2006
2008
2010
Source: USDA, National Agricultural Statistics Service
2012

After Property Tax Ag Rents as % of Value
CO
KS
NE
OK
WY
1951-2010
5.65%
5.81%
6.42 %
4.46 %
6.16 %
2011
2.37%
3.24 %
4.20 %
2.21 %
1.49 %
Source: Kansas State University Department of Agricultural Economics
(Publication: AM-KCD-2011.18)
Agriculture &
Business
Management
Percentage of land value
• Lately a volatile proposition
Fixed cash rent
• Shifts risk to tenant, easier for absentee landlords
Crop share rent
• Increasingly hard on tenants with changes in technology &
higher input costs
Fixed cash rent floor with “bonus” tied to price & yield
• Allows landlord to participate in some upside & lowers
Agriculture &
downside risk for tenant
Business
Management
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Crop Share Lease Agreements
Fixed Cash Crop Lease Agreements
Flexible Cash Crop Lease Agreements
Leasing Arrangements for Cattle
Pasture Leases
Estimating Rental Rates of Crop Land for
Landowners & Tenants (Excel Workbook)
CSU Crop Enterprise Budgets (Corn, Alfalfa, Wheat,
Sunflowers, Sugarbeets, Millet, Pinto Beans, etc.)
http://www.coopext.colostate.edu/ABM/cropbudgets.htm
Agriculture &
Business
Management
Estimating Rental Rates of Crop Land
for Landowners and Tenants
By:
Jeffrey E. Tranel
Norman Dalsted, PhD
Agriculture and Business Management Economists
Colorado State University
http://www.coopext.colostate.edu/ABM/
Email your questions to: [email protected]
This template is designed to help landowners and tenants of crop land compare the portions of production and
expenses.
You may move to each tab (at the bottom of the screen).
Enter your data into any cell with a pale background and blue colored numbers.
Programs are available to all without discrimination.
Agriculture &
Business
Management
Dryland Wheat
Total
Share Arrangement
Production
60 bushels
40 bushels
30 bushels
20 bushels
Production Costs
Fertilizer & Chemicals
Crop Insurance
Real Estate Taxes
All Other
Total
(Sha re=1, Tena nt=2, La ndl ord=3)
Agriculture &
Business
Management
60
40
30
20
Tenant
0.7000
Landlord
0.3000
42.00
28.00
21.00
14.00
18.00
12.00
9.00
6.00
42.00
14.00
65.00
121.00
81%
18.00
6.00
4.50
28.50
19%
Total
Tenant Landlord
Gross Receipts @
$480
$336
$320
$224
$240
$168
$160
$112
$8.00
$144
$96
$72
$48
Total
Net Returns
$331
$171
$91
$11
Tenant Landlord
$215
$103
$47
($9)
Split
1
1
3
2
60.00
20.00
4.50
65.00
149.50
Breakeven Yield (costs / price)
For Tenant
15.13 bushels
For Landlord
3.56 bushels
$116
$68
$44
$20
Cropland Rents Flexed for Price and Yield
Wheat
Corn
Alfalfa
$35
$200
$200
Current Price for Crop
Base Price (5 year average)
$8.00
$6.00
$7.25
$5.00
$200
$140
Projected Yield
Base Yield (county average)
40
32
200
175
6.00
4.50
Rent Flexed for Price
$47
$290
$286
Rent Flexed for Yield
$44
$229
$267
Rent Flexed for Price & Yield
$58
$331
$381
Projected Cash Rent (for all acres)
Agriculture &
Business
Management
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County assessor offices & webpages (Sale data)
◦ http://www.qpublic.net/co/
 Alamosa, Cheyenne, Conejos, Crowley, Custer, Dolores,
Fremont, Gunnison, Kit Carson, Las Animas, Lincoln,
Mineral, Saguache, San Juan, Sedgwick, Washington,
Yuma
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USDA/NASS Surveys (Rent survey, county level)
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CSU ABM Custom Rates Survey (Rent survey, region)
◦ http://www.coopext.colostate.edu/ABM/custrates.htm
Agriculture &
Business
Management
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Nickerson, C., M. Morehart, T. Kuethe, J.
Beckman, J. Ifft, and R. Williams (2012) “Trends
in U.S. Farmland Values and Ownership” EIB 92
Economic Research Service
Kansas State University Department of
Agricultural Economics (Publication: AM-KCD2011.18)
Federal Reserve Bank of Kansas City – Tenth
Federal Reserve District (Quarterly Agricultural
Credit Survey)
Agriculture &
Business
Management
John Deering
970-345-2287
[email protected]
Lease Arrangement Resources:
http://www.coopext.colostate.edu/ABM/investment.htm
Agriculture &
Business
Management