Iowa Farmland

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Iowa Farmland

• Realtors Land Institute
• December 6, 2004
• Michael Duffy

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Outline

• Background
• Land Values
• Rate of Return
• Expectations
• Land Ownership Trends and Implications
• Land Rents and Rental Arrangements
• Costs of Production
• Are we set up for another fall?

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Iowa Farmland

• 68 percent of land is harvested
• 62 percent of the land is in corn or soybeans
• 68 percent of the land in farms is in corn or
  soybeans
• Iowa farmland valued at approximately 73B
• 91 percent of land is in farms

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Percent of Farmland in Corn, Soybeans
Does not include land in building sites or
woodlands.
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Percent of Farmland Idled, in Cover Crops,
Unharvested, Failed, or Abandoned
Does not include land in building sites or
woodlands.
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Percent of Farmland in Hay and Oats
Does not include land in building sites or
woodlands.
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Percent of Farmland in Pasture
Does not include land in building sites or
woodlands. Includes both woodland and rangeland
pasture.
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Percent of Farmland in Woodlands, Houses, Ponds,
Roads, and Wasteland
Lyon
Worth
Winnebago
Osceola
Emmet
Dickinson
Mitchell
Howard
5.1
5.6
4.1
5.4
3.8
3.9
Winneshiek
Allamakee
6.2
8.6
14.4
30.2
Kossuth
4.1
Sioux
Palo Alto
OBrien
Hancock
Clay
Cerro Gordo
Floyd
Chickasaw
4.6
4.3
4.8
3.5
5.1
4.2
6.0
7.3
Fayette
Clayton
10.0
22.0
Humboldt
Bremer
Wright
Pocahontas
Plymouth
Franklin
Cherokee
Butler
Buena Vista
5.3
7.3
4.4
5.2
5.7
5.2
4.4
5.3
7.0
Dubuque
Delaware
Buchanan
Black Hawk
Webster
15.2
10.0
6.2
6.5
Woodbury
Sac
Ida
Hardin
Hamilton
Grundy
Calhoun
5.9
7.3
6.0
5.8
4.4
5.4
4.9
3.7
Jackson
18.5
Jones
Tama
Linn
Benton
11.3
Monona
Crawford
Story
Marshall
Greene
Carroll
Boone
7.0
11.0
6.8
5.6
9.1
6.3
6.2
7.0
6.3
8.5
Clinton
7.5
Cedar
8.3
Shelby
Poweshiek
Polk
Jasper
Iowa
Harrison
Guthrie
Dallas
Audubon
Johnson
Scott
5.0
9.1
7.6
12.4
8.6
9.5
7.7
7.2
6.8
10.0
5.5
Muscatine
10.9
Washington
Warren
Pottawattamie
Marion
Mahaska
Madison
Keokuk
Cass
Adair
11.0
13.8
6.7
12.4
10.2
14.5
11.9
6.0
8.6
Louisa
12.3
Wapello
Montgomery
Monroe
Mills
Lucas
Jefferson
Clarke
Adams
Union
Henry
16.2
8.8
16.8
11.0
7.6
19.1
21.0
14.6
9.1
15.2
Des Moines
12.0
Van Buren
Wayne
Page
Fremont
Davis
Appanoose
Taylor
Ringgold
Decatur
Lee
20.7
9.1
16.3
16.6
10.9
11.5
12.1
9.6
16.0
18.2
3.5 - 6.0
6.0 - 10.0
10.0 - 15.0
15.0 - 31.0
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Rate of Return
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Capitalization Rate

• 2002 land taxes
• 10 land management fee
• ISU Extension Estimated Costs of Production, Land
  Values, and Cash Rents
• Government payment data from Environmental
  Working Group

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Land Compared to Dow Jones

• Yearly Dow Jones Industrial dividend reported by
  Dow Jones
• USDA/Economic Research Service rent values
• ISU Extension land values
• Assume 1,000 invested with returns reinvested
• Land tax is only ownership cost assumed

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Land Expectations

• ISU survey released Dec. 14, 2004
• Federal Reserve estimation
• 2 increase 3rd Quarter 12 increase July to
  July
• USDA/ERS estimate
• 2,200 per acre 9.5 increase Jan. to Jan.
• Chapter estimate
• 14.4 increase September to September

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Land Ownership Trends

• Telephone survey conducted by ISU Statistical
  Laboratory
• Data as of July 1 , 2002
• 633 useable responses, 80 response

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Land Rents and Rental Arrangements
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Costs of Production
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Are we setting ourselves up for a fall?
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Conclusions

• Iowa farmland owners are aging and the trend will
  continue for the next several years
• There will be a considerable amount of Iowas
  farmland change hands over the next few years.
  More than likely this land will be passed on to
  the next generation and not even enter the
  market.
• There will continue to be an increase in the
  amount of land owned by people outside the state.

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Conclusions

• Land ownership patterns will change with fewer
  sole owners and more multiple owners
• More land will be rented and cash rents will
  increase in prevalence
• Second generation may have different views
  towards land

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Conclusions

• Less debt against the land
• Different category of purchasers
• Fewer contracts
• Factors to watch
• Government programs
• Interest rates
• Exchange rates
• Deficit