Outlook for Land

1
Outlook for Land

• 2008 ABA National Agricultural Bankers Conference
• Michael Duffy, Director
• Iowa State University Beginning Farmer Center
• November 18, 2008

2
Outline

• Background
• Current situation
• Observations
• Outlook
• Discussion

3
Background

• Land values appear to have reached a plateau
  property is not bringing what it might have
  brought a few months ago
• There does not appear to be a drop in actual
  values
• Land values are still at record level
• Commodity prices have dropped considerably from
  their highs this summer
• Costs of production are increasing rapidly

4
Background

• Land continues to change from one generation to
  the next and trend will likely accelerate
• Equal division of land assets among family
  members will increase non-resident owners, cash
  rent, and may put more land on the market
• Trusts are being more widely used
• Many of the purchases are equity financed and
  farmers continue to be major drivers but if
  incomes drop so will their interest

5
(No Transcript)
6
(No Transcript)
7
(No Transcript)
8
(No Transcript)
9
Costs of Production
10
(No Transcript)
11
(No Transcript)
12
(No Transcript)
13
(No Transcript)
14
(No Transcript)
15
(No Transcript)
16
(No Transcript)
17
Land and Cash Rents
18
(No Transcript)
19
(No Transcript)
20
(No Transcript)
21
(No Transcript)
22
(No Transcript)
23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
(No Transcript)
27
(No Transcript)
28
Debt Situation
29
(No Transcript)
30
(No Transcript)
31
(No Transcript)
32
(No Transcript)
33
(No Transcript)
34
(No Transcript)
35
(No Transcript)
36
(No Transcript)
37
Land Owner Demographics
38
(No Transcript)
39
(No Transcript)
40
(No Transcript)
41
(No Transcript)
42
(No Transcript)
43
(No Transcript)
44
Observations
45
(No Transcript)
46
Observations

• Conditions can change very quickly
• This boom period appears to have ended much
  sooner than anyone thought
• Most people are kind of numb right now just
  waiting for the other shoe to drop
• Farmers appear to be moving back from purchases
  and taking a wait and see attitude

47
Observations

• Great deal of uncertainty
• Concentration in input industry leads to sticky
  prices on the down side
• Farmers are making decisions to cut costs
  Successful Farming survey showed 33 will cutback
  over 50 and 16 between 26 and 50
• Only 12 percent of the leased land in Iowa uses a
  flexible lease

48
Outlook

• The economy is the biggest factor to watch
• Commodity prices and input costs determine income
  and income determines land values
• Energy prices and the impact will be important

49
Factors to Watch

• Public sentiment including environmental concerns
• World situation
• Impact on food costs
• Energy prices
• Farmer profitability costs, especially seed,
  fertilizers and rents rapidly increasing
• Alternative energy

50
Outlook

• Values will remain relatively flat depending on
  how deep recession goes
• Energy crisis and renewed strength in biofuel
  efforts will determine strength
• Very uncertain

51
Discussion
52
THANK YOU