Transcript Farmland Values & Cash Rent Craig Dobbins 2011 Purdue Land Value Survey Cash Rent Results Land Yield Value ($/a) % Quality Bu/A 2010 2011 Change Top 13.9% Aver. 13.0% Poor 13.7%

Farmland Values & Cash Rent
Craig Dobbins
2011 Purdue Land Value Survey
Cash Rent Results
Land Yield Value ($/a)
%
Quality Bu/A 2010 2011 Change
Top
188
202
230
13.9%
Aver.
157
161
182
13.0%
Poor
126
124
141
13.7%
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Value per acre
Average Quality Cash Rent, 1975 - 2011
350
300
250
200
150
100
50
0
Year
Nominal
Inflation Adj. (2011)
Cash Rent Comparison
2002 - 2006 & 2007 - 2011
Percent change in average farmland cash rent
14,00%
12,00%
Percent change
10,00%
8,00%
2007-11
2002-06
6,00%
4,00%
2,00%
0,00%
1
2
3
4
5
Cash rent per bu. – Average soil
1,25
1,15
$/Bu.
1,05
0,95
0,85
0,75
0,65
0,55
1970
1975
1980
1985
1990
Year
1995
2000
2005
2010
2015
Preliminary 2011 Purdue Land Value
Survey – Land Value Results
Land Yield Value ($/a)
%
Quality Bu/A 2010 2011 Change
Top
188 5,310 6,521 22.8%
Aver.
157 4,419 5,468 23.7%
Poor
126 3,501 4,368 25.3%
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Value per acre
Average Quality Land Value, 1970 - 2011
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
Year
Nominal
Inflation Adj. (2011)
Comparison of Change in Farmland Value
2002 – 2006 & 2007 - 2011
Percent change in average farmland cash rent
14,00%
12,00%
Percent change
10,00%
8,00%
2007-11
2002-06
6,00%
4,00%
2,00%
0,00%
1
2
3
4
5
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
Farmland Value per Bu. of Corn
Average Land
40,00
35,00
30,00
25,00
20,00
15,00
10,00
5,00
0,00
Value/Rent multiple – Average land
32
Value/Rent Multiple
Current = 30.1
27
22
Mean = 18.6
17
12
7
1975
1979
1983
1987
1991
Year
1995
1999
2003
2007
2011
2012 Projections - Prepared August 10, 2011
Item
Rotation Corn
Per acre
Yield
Price
Direct payment
Per bu.
161
Rotation Soybeans
Per acre
Per bu.
49
$5.90
$5.90
$12.40
$12.40
$26.00
$0.16
$14.00
$0.29
Gross Revenue
$976
$6.06
$622
$12.70
Production cost
$462
$2.87
$246
$5.02
Contribution margin
$514
$3.19
$376
$7.67
Machinery overhead
$80
$0.50
$80
$1.63
Labor
$39
$0.24
$39
$0.80
Return to land & risk
$395
$2.45
$257
$5.24
2011 Cash rent – average
land
$187
$1.16
$187
$3.82
Profit
$208
$1.29
$70
$1.42
New Price Plateau
Corn ($/bu.)
Soybeans ($/bu.)
$6.70
$17.56
$4.60
$10.58
$3.00
$7.51
Source: Dr. Scott Irwin
New Price Plateau
Item
Rotation
Corn
Rotation
Rotation
Soybeans
Per acre
Per acre
Yield
161
49
Price
$4.60
$10.58
Direct payments
$26.00
$14.00
Gross Revenue
$767
$532
Production cost
$468
$246
Contribution margin
$299
$286
Machinery & labor
overhead, & 2011 rent
$306
$306
Loss
$7.00
No direct payments
$13.50
$33.50
$20.00
Farmland Value
Scenario
Return to land
Value/income
multiple
Farmland value
Continue estimated
2012
$340
30
$10,200
New price plateau
$174
30
$5,220
-10%
-20%
-30%
Year
2010 - 11
2008 - 09
2006 - 07
2004 - 05
2002 - 03
2000 - 01
1998 - 99
1996 - 97
1994 - 95
1992 - 93
1990 - 91
1988 - 89
1986 - 87
1984 - 85
1982 - 83
1980 - 81
1978 - 79
1976 - 77
1974 - 75
1972 - 73
Percentage
Annual Percent Change in Average Land
1972 - 2011
60%
50%
40%
30%
20%
10%
0%
Continue Higher
• Strong demand for corn from the ethanol industry
because of biofuel mandates
• Strong soybean export demand
• 2011 U.S. corn and soybean crop that is average or
below average
• Moderate increases in input costs for corn and
soybeans, keeping crop production margins well
above historic average
• Low long-term interest rates
• Little change in the amount of land available for sale
Steady or Decline
• Sharp decline in corn and/or soybean export demand
• Sudden change in the U.S. policy away from providing biofuel
subsidies and mandating usage
• Sharp rise in interest rates because of a downgrade in the credit
rating of U.S. government debt obligations or increased inflation
fears
• Exceptionally large 2011 corn and soybean crop
• Sharp rise in crop input prices reducing crop production margins
• Further slowing of world growth because of sovereign debt
problems, including the U.S.
• Strong supply response resulting from new capital investments in
agricultural production
• U.S. recession
• Some combination of the above or some unknown development