10/22/2012. Current Land Values & Cash Rental Rates. Nebraska Land Values Know how. Know now.

Transcription

1 Current Land Values & Cash Rental Rates Presented by: Allan Vyhnalek Platte County Prepared by: T. Lemmons & A. Vyhnalek Adapted from: B. Johnson. (2012). Nebraska Farm Real Estate Market Report. UNL Extension Nebraska Land Values

2 2012 Values and Recent Trends by Land Class in Nebraska a 2

3 2012 Values and Recent Trends by Area of the State a Perfect storm for land value increase Demand Availability of Money profits from farming Low interest rates Net annual returns on the value of the land investment (declining vs. alternative) Supply Lack of land for sale Nebraska Farm Income 3

4 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 (Source: USDA NASS, August 2012) Average Price Received by Month Soybeans Nebraska (Source: USDA NASS, August 2012) 4

5 Annual Percentage of Agricultural Land Sold in Nebraska (1/10/11 6/31/11) Percentage of Land Sold 2011 by County 5

6 How are we financing the Land? 51% Cash State Wide Over 70% in Northwest and North with Cash 46% Mortgage State wide SOURCE: Based on 630 transactions which occurred across Nebraska during 2011 and reported in the 2012 UNL Nebraska Farm Real Estate Market Developments Survey. Farm Income and Expenses Land Summary Be Cautious! Historic High Global demand for food which doubles by 2050 Still going up? At Peak? Starting decline? Watch local markets Monitor available cash 6

7 Cash Rents Note differences between NASS and UNL surveys Note differences between surveys and local information What are flaws with the data available? Maybe cash rents need to be tied to productivity of the land? 2011 Nebraska Dryland Cropland Rent Paid Per Acre 2012 Nebraska Dryland Cropland Rates Paid Per Acre 7

8 Reported Cash Rental Rates: Dryland Cropland Average % Change from High Low 2011 Northwest b b b b North b b b b Northeast Central East Southwest South Southeast Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey b: Insufficient number of reports 8

9 Reported Cash Rental Rates: Gravity Irrigated Cropland 2012 Average % Change from High Low 2011 Northwest b b b b North b b b b Northeast Central East Southwest b b b b South Southeast Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey b: Insufficient number of reports Reported Cash Rental Rates: Center Pivot Irrigated Cropland 2012 Average % Change from High Low 2011 Northwest North Northeast Central East Southwest South Southeast Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey b: Insufficient number of reports 9

10 Reported Cash Rental Rates: Pasture Average % Change from High Low 2011 Northwest North Northeast Central East Southwest South Southeast Source: 2012 UNL Nebraska Farm Real Estate Market Developments Survey Cash Rent Summary Note Differences in numbers NASS survey UNL Cash Rent survey Coffee Shop Cash rents clearly up recently but don t always trend with land values (10% vs 30+%) When does the up trend end? 10

11 Estimating Cash Rent To get to the right ball park (one simple way) % of gross corn revenue per acre 200 bu./acre times $6.00 per bushel ** = $1200 $1200 times.3 (30%) = $360 (estimated rent) 30 33% of gross soybean revenue per acre 60 bu/acre times $12.50 ** equals $750 per acre $750 times.33 (33%) = $248 (estimated rent) Estimated rent about $304 per acre right blend for this farm (Assuming 50% corn and beans averaging 360 and 248) (** local elevator price for fall 13) Cash Rent Summary Historic High Trust vs. Greed (both tenant and landlord) The person taking the risk should get reward or consequence Communications is essential especially for tenant Yield data shared very important More flexible provision leases being discussed and implemented (tied to productivity/price/gross income) Implications of Drought Pasture and Range biggest concern Rainfed crop ground Irrigation wells/water supply/restrictions 11

12 Thanks for listening! Tread carefully with land purchases Consider flexing leases Base lease on productivity Communicate!!! Allan Vyhnalek, Extension Educator UNL Extension, Platte County