CALCULATED LAND USE VALUES

Transcription

1 Staff Paper SP May 2015 CALCULATED LAND USE VALUES FOR LOUISIANA S AGRICULTURAL AND HORTICULTURAL LAND, Prepared for The Louisiana Tax Commission Prepared by Dr. Michael Salassi & Dr. Kurt Guidry Department of Agricultural Economics & Agribusiness Louisiana State University Agricultural Center Baton Rouge, LA 70803

2 CALCULATED LAND USE VALUES FOR LOUISIANA S AGRICULTURAL AND HORTICULTURAL LAND, Executive Summary This report presents estimates of the average land use values and average assessed values for agricultural and horticultural land in Louisiana over the period as requested by the Louisiana Tax Commission. Summary points from this current land use estimation calculation are presented below. The estimated weighted average commodity net income per acre for major agricultural and horticultural enterprises in Louisiana over the period was estimated to be $ per acre (Table 1). This average net income value is up substantially from the estimated average of $63.76 per acre, due to the significantly high, and in some cases record, levels of agricultural market prices and crop yields which have occurred over the past four years, particularly for corn, soybeans and sugarcane as well as beef prices. Over the period, the average market price and average crop yield for all major row crops produced in Louisiana, including corn, cotton, rice, sorghum, soybeans, sugarcane and wheat, were significantly higher than the previous average. Record market prices and crop yields above trend were the major drivers of increased net returns. Estimated capitalization rates for the period ranged from 6.21% to 6.40% over alternative property turnover periods. As a result, the statutory minimum capitalization rate of 12% was used to determine estimated use values. Average estimated use values ranged from $1,491 to $778 per acre for upper level Class I to Class IV land and from $1,253 to $503 per acre for lower level Class I to Class IV land (Table 4). Using a 10% factor, the average estimated assessed values of agricultural and horticultural land ranged from $149 to $78 per acre for upper level Class I to Class IV land and from $125 to $50 per acre for lower level Class I to Class IV land (Table 5). After reaching extremely high levels during , market prices for all major row crops are projected to decline during the period (Table 6). Major prices for major commodities reached their peak in 2012 or 2013 and then started to decline. Current 4-year projections ( ) of commodity prices, compared to the previous 4-year average ( ) show price declines for all major row crops including corn (-$1.32/bu.), soybeans (-$2.68/bu.), winter wheat (-$1.58/bu.), cotton (-$0.13/lb.), sorghum (-$1.35/bu.), and long grain rice (-$1.26/cwt.). Variability in commodity market prices will cause substantial volatility in estimated assessed values for land classes based on the particular set of commodity market price histories used in the calculation (Table 7). Price histories, as well as yield histories, utilized over a longer period to time reduces estimated assessed value volatility. Assessed land values ranged from $134 to $45 per acre using a previous 5-year price history and ranged from $60 to $20 per acre using a previous 10-year price history. Assessed values using projected commodity prices ranged from $70 to $24 per acre, due primarily to lower projected near term future commodity prices.

3 TABLE OF CONTENTS Page INTRODUCTION.. 1 USE VALUE CALCULATIONS.. 1 Costs of Production Price, Yields, Government Payments, and Acreage.. 2 Weighted Fractional Yield Index Table.. 2 Average Net Income per Acre... 3 Average Use Value per Acre Average Assessed Value per Acre COMPARATIVE COMMODITY PRICE AND YIELD HISTORY.. 3 CURRENT MARKET PRICE FORECASTS FOR MAJOR COMMODITIES. 13 IMPACT OF PRICE CHANGES ON ESTIMATED ASSESSED VALUE VOLATILITY 14 REFERENCES TO PREVIOUS REPORTS.. 15 APPENDIX A Returns and Expenses per Acre, by Major Commodity, Average APPENDIX B - Season Average Prices, Production Yields and Harvested Acreage, by Major Commodity, APPENDIX C - Interest Rates and Calculation of Capitalization Rate,

4 CALCULATED LAND USE VALUES FOR LOUISIANA S AGRICULTURAL AND HORTICULTURAL LAND, INTRODUCTION The Louisiana Constitution of 1974 provides for the use value method for the assessment of agricultural and horticultural land, as well as timberland and marshlands. The statutes, which define use value, also set forth the method for determining use value. Use value determination for agricultural and horticultural land is specifically assigned to the Louisiana Tax Commission (LTC). Use value is recalculated every four years, and the values determined by the LTC for each of the four classes of agricultural and horticultural land serve as the basis for use value assessment for the next four years. As in previous years, the LTC requested that faculty of the LSU AgCenter calculate the net returns for major agricultural enterprises and estimate use value assessment from the weighted average net return per acre. This report has been prepared at the request of the Louisiana State Tax Commission. Previous reports were completed in 1999, 2003, 2007 and The current report relies heavily on the documentation of this previous work and follows the same methodology, which will be outlined below. In a few instances, changes in data availability required that the methods used previously be modified. Deviations from the previous work will be identified and explained in this report. The procedure for making these calculations follows the broadly outlined criteria of the Louisiana statutes (La. R. S. 47:2307 A) for assessment of agricultural and horticultural land. The procedure provides an estimate of changes in use values over the past four years ( ). Legislation states that the use value of bona fide agricultural and horticultural lands are to be determined by dividing estimated net income by a capitalization rate. This use value is to be determined for different classifications of land, the range of production costs and gross returns based on four year averages. Land classifications utilized are to include the first four land classifications of the U.S.D.A. Natural Resources Conservation Service. Use values are to be based on a weighted average gross returns and production costs, by land classification, of major agricultural and horticultural commodities produced in Louisiana for the four production years immediately preceding the year in which the estimates are developed. USE VALUE CALCULATIONS The land use value estimates calculated in this report are shown in Table 5, presenting the average assessed use value of each class of agricultural and horticultural land. The remaining tables in the main text and Appendices A, B, and C provide the data and information used to calculate these values. These values are based on the weighted average yields, input costs, and output prices for the years The remainder of this section explains the procedure used to make these calculations. Prepared by Dr. Michael Salassi and Dr. Kurt Guidry, Department of Agricultural Economics and Agribusiness, Louisiana State University Agricultural Center, Baton Rouge, Louisiana. 1

5 Costs of Production Annual commodity budgets published by the Department of Agricultural Economics and Agribusiness, LSU AgCenter, were used to calculate the four year average cost of production for commodities included in the study. Major commodities included were: beef cattle, corn, cotton, crawfish, dairy cattle, grain sorghum, rice, southern peas, soybeans, strawberries, sugarcane, sweet potatoes, tomatoes, watermelons, and wheat. In addition, conservation reserve payments were included for acreage enrolled in the CRP Program. Idle land acreage was also included with no associated income or production cost. Budgets for each major commodity, showing estimated average costs and returns, are provided in Appendix A. Specific sources of information for each commodity are provided at the bottom of each budget table. The budget publications are available to the public at the LSU AgCenter website at: Price, Yields, Government Payments, and Acreage Several sources were used to compile the required information on commodity prices, yields, and acres of production during the four-year period ( ). Price, yield, and acreage data for corn, cotton, grain sorghum, rice, soybeans, and wheat were found at the National Agricultural Statistics Service website at: Price, yield, and acreage data for sugarcane, beef, dairy, crawfish, fruits, and vegetables came from the Louisiana Ag Summary. Those publications are located on the LSU AgCenter website: Acreage and cattle numbers for beef and dairy cattle were obtained from the 2012 Census of Agriculture. The specific values were taken from Tables 11 and 51. The Census of Agriculture can be accessed at: Government payments for federal farm programs vary by crop and are not available for many of the commodities included in this report. In addition, farm program payments for many of the major row crops are decoupled from actual plantings or production of those commodities. Therefore, government payments related to federal farm income support programs are not included in this report. Weighted Fractional The weighted fractional for each commodity was determined by multiplying the percent of total land area for each commodity by the net income per acre of the commodity. As specified in the statutes, negative income for a given commodity was set to zero. The sum of the weighted fractionals is the weighted average net income of an acre of agricultural and horticultural land. The average net income for the midpoint soil grouping is obtained by dividing the weighted average net income by 100 (Table 3). Yield Index Table A yield index (Table 2) is used to obtain the net income for each classification and sub-classification. The yield index was developed from Natural Resources Conservation Service (NRCS) data on soil yields by class. This table was used previously in the 2003, 2007 and 2011 reports. The soils data were bracketed into upper and lower sub-classifications on the basis of yield. Average yield potential was then obtained for each sub-classification. The productivity index for each classification and sub-classification was obtained by dividing the average yield for a group of soils falling between Lower Class II and Upper Class III into the other sub-classification average yields. 2

6 Average Net Income per Acre Table 3 presents the average net income per acre by class. It is found by multiplying the appropriate yield index (Table 2) by the weighted average income for the mid-grouping of the soils (Table 1). Average Use Value per Acre Table 4 presents the average use value per acre. It is found by dividing the average net income (Table 3) by the appropriate capitalization rate. The Use Value Law specifies that the following factors be considered when determining the appropriate capitalization rate: 1. Physical and economic risk. 2. Effect of relative marketability of agricultural and horticultural land on liquidity of said assets. 3. Competition with other investments and prevailing interest rates. 4. Any other appropriate factors. Following this method, the capitalization rate for the time period was estimated. In the 2003 report, data on length of time property was on the market before being sold was available for different locations around the state. That data was not available for this analysis. An alternative approach was used in 2007 and this report, looking at three different periods of time for property to remain on the market before being sold: 1.) 3-6 months, 2.) 6-12 months, and 3.) months. The capitalization rate was calculated for each of the three periods. The result was an estimated capitalization rate that ranged from 6.21 percent to 6.40 percent (Appendix Tables C-1, C-2, and C-3). These estimates are all below the 12 percent minimum rate specified in the Use Value Law. Therefore, the capitalization rate was set at 12 percent. Average Assessed Value per Acre The average assessed value of agricultural and horticultural land in the state (Table 5) was obtained by multiplying the use values (Table 4) by 10 percent. COMPARATIVE COMMODITY PRICE AND YIELD HISTORY The estimated weighted average net return above production expenses for major agricultural and horticultural enterprises over the is substantially higher than similar net return estimates in previous reports for prior years. The primary reason for this result is that market prices and crop yields over the past four years were substantially higher compared to prior years. Figures 1-7 are included to provide some perspective to this recent price and yield history for major row crops produced in the state. Graphs of historical price and yield values for the period are compared to values for the prior period. Price and yield graphs are included for the following major row crops: corn, cotton, rice, sorghum, soybeans, sugarcane (raw sugar), and wheat. 3

7 Table 1. Weighted Average Income Per Acre, Commodity Acres 1 Percent Net Income Weighted Fraction 7 Beef 2 2,137, % $20.51 $6.86 Conservation Reserve 3 318, % $65.65 $3.27 Corn 540, % $ $22.27 Cotton 202, % $46.86 $1.49 Crawfish 4 195, % $ $6.79 Dairy 2 43, % -$42.62 $0.00 Grain Sorghum 114, % $ $2.37 Idle Cropland 5 443, % -- $0.00 Rice 421, % $57.75 $3.81 Southern Peas 2, % $ $0.05 Soybeans 1,155, % $ $31.13 Strawberries % $10, $0.66 Sugarcane 6 578, % $ $21.44 Sweet Potatoes 9, % $2, $4.36 Tomatoes % $15, $1.10 Wheat 230, % $ $3.31 Watermelons 2, % $2, $0.88 Total 6,394, % $ Weighted Average Net Income = $ Per Acre 1 Agricultural and horticultural crops weighted by acres harvested. Crawfish weighted by acres harvested. Beef and dairy weighted by acres in beef cattle and dairy farms, respectively. 2 Acreage for beef and dairy were obtained from the 2012 Census of Agriculture, Volume 1, Louisiana State and Parish Data, Table Conservation Reserve Program acreage and payments for were taken from USDA-FSA CRP Enrollment and Rental Payments by State, Assumes farm-raised crawfish are produced in a mono-crop system (35%) or in a rice-crawfish doublecrop field rotation system with rice. Net income is weighted by the percent of crawfish acres produced in each system. Revenues and production costs are included for the crawfish portion only. 5 Acreage for idle cropland was obtained from the 2012 Census of Agriculture, Volume 1, Louisiana State and Parish Data, Table 8. Includes acreage for cropland idle or used for cover crops or soil-improvement, but not harvested and not pastured or grazed. 6 Acreage for sugarcane includes fallow/planted acreage. Net income estimated over total farm acres. 7 By state statute, negative net income for a given commodity is set equal to zero. 4

8 Table 2. Index of Yield Potential By Class (Midpoint Lower Class II Upper Class III = 100) Land Classification Upper Index Lower Index Class I Class II Class III Class IV Source: Natural Resource Conservation Service, USDA Table 3. Average Net Income Per Acre By Class, Land Net Income Per Acre Classification Upper ($/acre) Net Income per Acre Lower ($/acre) Class I Class II Class III Class IV Based upon weighted average mid-point value of $ per acre (Table 1) multiplied by the appropriate index of yield potential (Table 2) and divided by 100. Table 4. Average Use Value Per Acre of Agricultural And Horticultural Land By Class, Land Classification Use Value Per Acre Upper Use Value Per Acre Lower ($/acre) ($/acre) Class I 1, , Class II 1, Class III Class IV Obtained by dividing net income per acre by soil class (Table 3) by a statue minimum 12% capitalization rate. Table 5. Average Assessed Value Per Acre of Agricultural And Horticultural Land By Land Classification Class, Land Classification Assessed Value Per Acre Upper Assessed Value Per Acre Lower ($/acre) ($/acre) Class I Class II Class III Class IV Assessed value is obtained by multiplying 10 percent by the Use Value (Table 4). 5

9 Figure 1-A Figure 1-B 6

10 Figure 2-A Figure 2-B 7

11 Figure 3-A Figure 3-B 8

12 Figure 4-A Figure 4-B 9

13 Figure 5-A Figure 5-B 10

14 Figure 6-A Figure 6-B 11

15 Figure 7-A Figure 7-B 12

16 CURRENT MARKET PRICE FORECASTS FOR MAJOR COMMODITIES In the use of estimated agricultural and horticultural land use values for property tax purposes based on recent estimated net returns, expected net returns over near term future years is also important to consider. Although livestock production per unit of land area is relatively stable and crop production per unit of land area generally trends upward over time, market prices of crop and livestock products does vary in cycles due to the interaction of supply and demand. Commodity market prices for many major row crops, as well as some livestock, were very high during period. Those high market prices attract higher levels of production, through increased acreage or increased cattle inventory. This increased production will eventually cause commodity market prices to decline. This market price decline is already occurring for most major row crops, as illustrated in the table below. Market prices for major row crops reached a peak in 2012 or 2013 and then started to decline. Current estimates of commodity market prices over the period predict theses prices will continue to decline, thereby reducing net returns above total costs for most agricultural enterprises. Table 6. U.S. Estimated and Projected Commodity Prices, and All Winter Upland Wheat Wheat Cotton ($/bu) ($/bu) ($/lb) Year Corn ($/bu) $6.22 $6.89 $4.46 $3.69 Soybeans ($/bu) $12.50 $14.40 $13.00 $10.13 $7.24 $7.77 $6.87 $6.08 $6.81 $7.55 $6.89 $5.96 $0.883 $0.725 $0.779 $0.610 Grain Sorghum ($/bu) $5.99 $6.33 $4.28 $3.87 All Rice ($/cwt) $14.50 $15.10 $16.30 $14.21 LG Rice ($/cwt) $13.40 $14.50 $15.40 $ $3.93 $3.95 $3.99 $4.11 $9.31 $9.66 $10.00 $10.35 $5.20 $5.26 $5.43 $5.68 $5.02 $5.11 $5.27 $5.50 $0.605 $0.621 $0.622 $0.638 $3.68 $3.69 $3.79 $3.91 $14.17 $14.05 $14.04 $14.00 $12.59 $12.73 $12.68 $ Avg. $5.31 $12.51 $6.99 $6.80 $0.75 $5.12 $15.03 $ Avg. $3.99 $9.83 $5.39 $5.22 $0.62 $3.76 $14.07 $12.68 Difference -$1.32 -$2.68 -$1.60 -$1.58 Source: March 2015 U.S. Crop Price Update, FAPRI-MU Bulletin # $0.13 -$1.35 -$0.96 -$

17 IMPACT OF PRICE CHANGES ON ESTIMATED ASSESSED VALUE VOLATILITY As the estimated assessed value of agricultural and horticultural land is a function of commodity net income, changes in commodity prices have a direct impact on the level of the estimated assessed values for the four land classes. Greater variation in commodity market prices over time can result in substantial variation in calculated land use values, depending upon which particular market years are used in the commodity net income calculation. To illustrate this point, the table below includes the estimated weighted average commodity net income value along with the resulting agricultural use assessed values based on the previous four years of prices ( ) as reported in this report (column A), along with similar calculations using alternative commodity price histories. Using longer previous year price histories will minimize the variation in net income and assessed values from year to year (columns B-D). Substantial commodity price variation can also result in significant changes in net income and assessed value calculations over a relatively short period of time. Column E uses current year 2015 commodity prices for major row crops and livestock, while column F uses projected price over the period for major row crop and livestock enterprises. Using a relatively short evaluation period of four years can result in substantial volatility of estimated assessed land values. For example, estimated values for the period (column A) are approximately twice as large as estimated values for the period (column F) as a result of very high commodity market prices in the early period followed by expected lower commodity market prices in the later period. Table 7. Estimation of Assessed Value Using Alternative Commodity Price Histories Alternative Commodity Price Histories Estimated Value (A) 1 Previous 4 years ( ) (B) 2 Previous 5 years ( ) (C) 3 Previous 8 years ( ) (D) 4 Previous 10 years ( ) (E) 5 Current year (2015) Weighted Net Income (F) 6 Projected 4 years ( ) (dollars per acre) $ $98.67 $66.51 $43.86 $65.30 $51.52 Assessed Value: Upper Class I Class II Class III Class IV $ $ $90.57 $77.76 $ $ $81.41 $69.89 $90.34 $75.37 $54.87 $47.11 $59.58 $49.71 $36.19 $31.07 $88.70 $74.01 $53.87 $46.25 $69.99 $58.39 $42.51 $36.50 Lower Class I Class II Class III Class IV $ $92.40 $79.59 $50.32 $ $83.05 $71.54 $45.23 $75.93 $55.98 $48.22 $30.48 $50.08 $36.92 $31.80 $20.10 $74.55 $54.96 $47.34 $29.93 $58.82 $43.37 $37.35 $ Previous 4-year commodity prices ( ) are used to calculate weighted average net income per acre. 2 Previous 5-year commodity prices ( ) are used to calculate weighted average net income per acre. 3 Previous 8-year commodity prices ( ) are used to calculate weighted average net income per acre. 4 Previous 10-year commodity prices ( ) are used to calculate weighted average net income per acre. 5 Current year commodity prices (2015) are used to calculate weighted average net income per acre. 6 Projected 4 year commodity prices ( ) are used to calculate weighted average commodity net income per acre, based on FAPRI s March 2015 baseline projected commodity prices for major row crops and livestock and dairy. Prices for crawfish, fruits and vegetables held constant at their average. 14

18 REFERENCES TO PREVIOUS REPORTS Calculated Use Values for Louisiana s Agricultural and Horticultural Land, Prepared for the Louisiana Tax Commission, by the Department of Agricultural Economics and Agribusiness, LSU AgCenter, Baton Rouge, LA, July Calculated Use Values for Louisiana s Agricultural and Horticultural Land, Prepared for the Louisiana Tax Commission, by the Department of Agricultural Economics and Agribusiness, LSU AgCenter, Baton Rouge, LA, June Calculated Use Values for Louisiana s Agricultural and Horticultural Land, Staff Paper SP Prepared for the Louisiana Tax Commission, by the Department of Agricultural Economics and Agribusiness, LSU AgCenter, Baton Rouge, LA, September Calculated Use Values for Louisiana s Agricultural and Horticultural Land, Staff Paper SP Prepared for the Louisiana Tax Commission, by the Department of Agricultural Economics and Agribusiness, LSU AgCenter, Baton Rouge, LA, August

19 APPENDIX A RETURNS AND EXPENSES PER ACRE, BY MAJOR COMMODITY, AVERAGE 16

20 Table A-1. Beef (Cow-Calf), Expenses and Returns, Items Average Returns Calves Price ($/cwt) Calves Yield (cwt/cow) $ $ $ $ $ Calves Income $ Cull Heifers Price ($/cwt) $ $ $ $ $ Cull Heifers Yield (cwt/cow) 0.49 Cull Heifers Income $74.14 Cull Animals Price ($/cwt) $64.63 $78.70 $78.52 $ $ Cull Animals Yield (cwt/cow) 0.70 Cull Animals Income $71.20 Total Returns (per Cow) $ Expenses Total Direct Expenses 1 $ $ $ $ $ Total Fixed Expenses 1 $ $ $ $ $ Total Overhead Expenses 1 $98.55 $98.55 $98.55 $33.10 $82.19 Charge for Management 2 $36.84 Total Costs (per Cow) $ Net Returns (per Cow) $ Net Returns (per Acre) 3 $ Weighted average of estimated costs of cow-calf production on semi-improved pasture and native pasture. 2 Management charge estimated at 5% of total revenue. 3 Net returns per acre based on a stocking rate of 0.20 animals per acre estimated from 2012 Census of Agriculture data: (Table 51 beef cattle ranching land in farms (acres) = 2,137,913 and Table 11 number of beef cows (number) = 434,252). 4 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Beef Production Cost Publications: AEA 274, Tables 8.A and 9.A; AEA 284, Tables 8.A and 9.A; AEA 291, Tables 8.A and 9.A; 2014 AEA 299, Tables 8.A and 9.A. Beef market prices taken from LSU AgCenter Agricultural Summary reports. 17

21 Table A-2. Corn, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $ Total Returns $ Expenses (Nonirrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Nonirrigated) $ $33.68 $ $34.33 $ $35.23 $ $35.72 $ $34.74 $46.17 $ Percent Irrigated 56.3% 66.3% 67.6% 68.1% 64.6% Expenses (Irrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Irrigated) $ $89.03 $ $91.01 $ $91.87 $ $90.68 $ $90.65 $46.17 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of corn acres nonirrigated and irrigated from USDA Farm Service Agency certified acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Corn Production Cost Publications: AEA 276, Tables 17.A and 18.A; AEA 283, Tables 17.A and 18.A; AEA 288, Tables 17.A and 18.A; 2014 AEA 294, Tables 17.A and 18.A. Corn market prices and harvest yields taken from USDA-NASS reports. 18

22 Table A-3. Cotton, Expenses and Returns, Items Average Returns Price ($/lb) Yield (lbs/acre) Crop Income $ $ ,020.0 $ ,223.0 $ ,171.0 $ ,065.0 $ Total Returns $ Expenses (Nonirrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Nonirrigated) $ $ $ $ $ $ $ $ $ $ $39.91 $ Percent Irrigated 27.1% 29.7% 30.0% 33.3% 30.0% Expenses (Irrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Irrigated) $ $ $ $ $ $ $ $ $ $ $39.91 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of cotton acres nonirrigated and irrigated from USDA Farm Service Agency certified acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Cotton Production Cost Publications: AEA 276, Tables 6.A and 7.A; AEA 283, Tables 6.A and 7.A; AEA 288, Tables 6.A and 7.A; 2014 AEA 294, Tables 6.A and 7.A. Cotton market prices and harvest yields taken from USDA-NASS reports. 19

23 Table A-4. Crawfish, Expenses and Returns, Items Average Returns Price ($/lb) Yield (lbs/acre) Crawfish Income $ $ $ $ $ $ Total Returns $ Expenses (Mono-crop crawfish) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Mono-crop) $ $ $ $ $ $ $ $ $ $ $42.37 $ Percent in Rice Field Rotation 65.0% 65.0% 65.0% 65.0% 65.0% Expenses (Crawfish portion of rice-crawfish field rotation) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Field rotation) $ $84.72 $ $84.40 $ $82.58 $ $84.78 $ $84.12 $42.37 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of crawfish acres in mono-crop and rice field rotation production. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Crawfish Production Cost Publications: AEA 277, Tables 3.A and 5.A; AEA 286, Tables 3.A and 5.A; AEA 293, Tables 3.A and 5.A; 2014 AEA 298, Tables 3.A and 5.A. Crawfish market prices and harvest yields taken from LSU AgCenter Ag Summary reports. 20

24 Table A-5. CRP and Idle Land, Expenses and Returns, Items Average Conservation Reserve Program Acres 1 327, , , , ,421 Payment Rate 1 $61.63 $63.24 $67.23 $70.48 $65.65 Idle Land Acres ,430 1 CRP acres and payment rates per acre for Louisiana were taken from USDA Farm Service Agency data 2 Idle land acreage taken from 2012 Census of Agriculture, Louisiana, Table 8. 21

25 Table A-6. Dairy, Expenses and Returns, Items Average Returns Milk Price ($/cwt) Milk Yield (cwt/cow) $21.60 $19.80 $21.71 $26.55 $ Milk Income $3, Bull Calves Price ($/cwt) $25.00 $25.00 $25.00 $50.00 $31.25 Bull Calves Yield (cwt/cow) 0.45 Bull Calves Income $14.06 Cull Heifers Price ($/cwt) $93.00 $ $ $ $ Cull Heifers Yield (cwt/cow) 0.26 Cull Heifers Income $29.12 Cull Animals Price ($/cwt) $48.50 $53.00 $75.00 $75.00 $62.88 Cull Animals Yield (cwt/cow) Cull Animals Income $ Total Returns (per Cow) $3, Expenses Total Direct Expenses $2, $2, $2, $2, $2, Total Fixed Expenses $ $ $ $ $ Total Overhead Expenses $98.55 $98.55 $98.55 $82.35 $94.50 Charge for Management 1 $ Total Costs (per Cow) $3, Net Returns (per Cow) -$ Net Returns (per Acre) 2 -$ Management charge estimated at 5% of total revenue. 2 Net returns per acre based on a stocking rate of 0.37 animals per acre estimated from 2012 Census of Agriculture data: (Table 51 dairy cattle and milk production land in farms (acres) = 43,201 and Table 11 number of milk cows (number) = 16,089). 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Dairy Production Cost Publications: AEA 275, Table 4.D; AEA 285, Table 4.A; AEA 292, Table 4.A; 2014 AEA 297, Table 4.A. for production costs and animal price data. Milk market prices taken from LSU AgCenter Agricultural Summary reports. 22

26 Table A-7. Grain Sorghum, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $ Total Returns $ Expenses (Nonirrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Nonirrigated) $ $24.33 $ $24.85 $ $26.14 $ $26.75 $ $25.52 $25.83 $ Percent Irrigated 6.7% 6.2% 6.9% 8.8% 7.2% Expenses (Irrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Irrigated) $ $79.68 $ $81.53 $ $82.78 $ $81.71 $ $81.43 $25.83 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of grain sorghum acres nonirrigated and irrigated from USDA Farm Service Agency certified acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Grain Sorghum Production Cost Publications: AEA 276, Table 19.A; AEA 283, Table 19.A; AEA 288, Table 19.A; 2014 AEA 294, Table 19.A. Costs of irrigation were factored in for the percent of grain sorghum acres which were irrigated. Grain sorghum market prices and harvest yields taken from USDA-NASS reports. 23

27 Table A-8. Rice, Expenses and Returns, Items Average Returns Price ($/cwt) Yield (cwt/acre) Crop Income $ $ $ $ $ $ Total Returns $ Expenses (First Crop) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (First Crop) $ $81.54 $ $81.78 $ $85.64 $ $81.42 $ $82.62 $48.58 $ Percent Ratooned 25.3% 26.3% 32.3% 28.0% 28.0% Expenses (Ratoon Crop) Total Direct Expenses Total Fixed Expenses Total Costs (Ratoon Crop) $ $22.56 $ $22.44 $ $22.66 $ $21.77 $ $22.36 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of rice acres ratooned and not ratooned from LSU AgCenter rice acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Rice Production Cost Publications: AEA 272, Tables 19.A and 23.A; AEA 281, Tables 19.A and 23.A; AEA 289, Tables 19.A and 23.A; 2014 AEA 296, Tables 19.A and 23.A. Rice market prices and harvest yields taken from USDA-NASS reports. 24

28 Table A-9. Southern Peas, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $2, Total Returns $2, Expenses Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 $1, $ $1, $ $1, $ $1, $ $1, $ $ Total Costs $1, Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Totals may not sum due to rounding. Sources: Market prices and yields were taken from LSU AgCenter Ag Summary Reports for Production cost estimates were developed from LSU AgCenter Department of Agricultural Economics Vegetable Production Cost Publication AEA 279, Table 22.B, 2011 and adjusted for based on input price and equipment cost changes. 25

29 Table A-10. Soybeans, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $ Total Returns $ Expenses (Nonirrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Nonirrigated) $ $26.34 $ $27.11 $ $28.25 $ $29.05 $ $27.69 $30.02 $ Percent Irrigated 27.1% 29.7% 30.0% 37.6% 31.1% Expenses (Irrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Irrigated) $ $81.71 $ $83.66 $ $84.62 $ $83.80 $ $83.45 $30.02 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of soybean acres nonirrigated and irrigated from USDA Farm Service Agency certified acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Soybean Production Cost Publications: AEA 276, Tables 10.A and 13.A; AEA 283, Tables 10.A and 13.A; AEA 288, Tables 10.A and 13.A; 2014 AEA 294, Tables 10.A and 13.A. 26

30 Table A-11. Strawberries, Expenses and Returns, Items Average Returns Price ($/flat) Yield (flats/acre) Crop Income $ $ ,193.0 $ ,110.9 $ ,086.7 $ ,797.6 $33, Total Returns $33, Expenses Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 $20, $ $20, $ $20, $ $20, $ $20, $ $1, Total Costs $22, Net Returns (per Acre) $10, Management charge estimated at 5% of total revenue. 2 Totals may not sum due to rounding. Sources: Market prices and yields were taken from LSU AgCenter Ag Summary Reports for Production cost estimates were developed from LSU AgCenter Department of Agricultural Economics Vegetable Production Cost Publications AEA 279, Table 32.B, 2011 and adjusted for based on input price and equipment cost changes. 27

31 Table A-12. Sugarcane, Expenses and Returns, Items Average Returns Sugar Price ($/lb) Sugar Yield (lbs/harvested acre) 1 Sugar Yield (lbs/farm acre) Sugar Income $ , ,291.8 $ , ,097.2 $ , ,505.7 $ , ,628.9 $ , ,630.9 $1, Molasses Price ($/gal) Molasses Yield (gal/farm acre) Molasses Income $ $ $ $ $ $ Total Returns $1, Expenses Mill Charge 2 Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 3 Total Costs $ $ $ $ $ $ $ $ $ $ $ $80.47 $1, Net Returns (per Acre) $ Sugar yield per acre harvested for sugar. Excludes acres harvested for seed. 2 Mill charge at 39% of sugar revenue and 50% of molasses revenue. 3 Management charge estimated at 5% of total revenue. 4 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Sugarcane Production Cost Publications: AEA 267, Table 2.A; AEA 282, Table 2.A; AEA 290, Table 2.A; 2014 AEA 295, Table 2.A. 28

32 Table A-13. Sweet Potatoes, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $6, Total Returns $6, Expenses Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 $ $ $ $ $ $ $ $ $2, $ $ Total Costs $3, Net Returns (per Acre) $2, Management charge estimated at 5% of total revenue. 2 Totals may not sum due to rounding. Sources: Market prices and yields were taken from LSU AgCenter Ag Summary Reports for Production cost estimates were developed from LSU AgCenter Department of Agricultural Economics Vegetable Production Cost Publications AEA 279, Table 28.B, 2011 and adjusted for based on input price and equipment cost changes. 29

33 Table A-14. Tomatoes, Expenses and Returns, Items Average Returns Price ($/lug) Yield (lug/acre) Crop Income $ ,352.0 $ ,437.9 $ ,463.9 $ ,428.0 $ ,420.4 $26, Total Returns $26, Expenses Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 $8, $ $9, $ $9, $ $9, $ $9, $ $1, Total Costs $10, Net Returns (per Acre) $15, Management charge estimated at 5% of total revenue. 2 Totals may not sum due to rounding. Sources: Market prices and yields were taken from LSU AgCenter Ag Summary Reports for Production cost estimates were developed from LSU AgCenter Department of Agricultural Economics Vegetable Production Cost Publication AEA 279, Table 35.B, 2011 and adjusted for based on input price and equipment cost changes. 30

34 Table A-15. Watermelons, Expenses and Returns, Items Average Returns Price ($/cwt) Yield (cwt/acre) Crop Income $ $ $ $ $ $4, Total Returns $4, Expenses Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 $1, $ $1, $ $1, $ $1, $ $1, $ $ Total Costs $2, Net Returns (per Acre) $2, Management charge estimated at 5% of total revenue. 2 Totals may not sum due to rounding. Sources: Market prices and yields were taken from LSU AgCenter Ag Summary Reports for Production cost estimates were developed from LSU AgCenter Department of Agricultural Economics Vegetable Production Cost Publication AEA 279, Table 39.B, 2011 and adjusted for based on input price and equipment cost changes. 31

35 Table A-16. Wheat, Expenses and Returns, Items Average Returns Price ($/bu) Yield (bu/acre) Crop Income $ $ $ $ $ $ Total Returns $ Expenses (Nonirrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Nonirrigated) $ $23.13 $ $24.06 $ $25.66 $ $26.22 $ $24.77 $19.68 $ Percent Irrigated 7.6% 4.4% 6.4% 7.5% 6.5% Expenses (Irrigated) Total Direct Expenses Total Fixed Expenses Total Overhead Expenses Charge for Management 1 Total Costs (Irrigated) $ $78.48 $ $80.74 $ $82.30 $ $81.18 $ $80.68 $19.68 $ Weighted Average Total Costs 2 $ Net Returns (per Acre) $ Management charge estimated at 5% of total revenue. 2 Weighted average total costs were estimated based on the percent of wheat acres nonirrigated and irrigated from USDA Farm Service Agency certified acreage reports. 3 Totals may not sum due to rounding. Sources: LSU AgCenter Department of Agricultural Economics Soybean Production Cost Publications: AEA 276, Table 20.A; AEA 283, Table 20.A; AEA 288, Table 20.A; 2014 AEA 294, Table 20.A. Costs of irrigation were factored in for the percent of wheat acres which were irrigated. 32

36 APPENDIX B SEASON AVERAGE PRICES, PRODUCTION YIELDS AND HARVESTED ACREAGE, BY MAJOR COMMODITY,

37 Table B-1. Season Average Prices, Production Yields and Harvested Acreage for Major Agronomic and Horticultural Crops, Louisiana, Crops Average Corn 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,000 $ ,000 $ ,000 $ ,000 $ ,000 Cotton 1 Average Price ($/lb lint) Average Yield (lbs/harv. acre) Acreage Harvested $ ,000 $ , ,000 $ , ,000 $ , ,000 $ , ,750 Grain Sorghum 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,000 $ ,000 $ ,000 $ ,000 $ ,000 Rice 1 Average Price ($/cwt) Average Yield (cwt/harv. acre) Acreage Harvested $ ,000 $ ,000 $ ,000 $ ,000 $ ,500 Soybeans 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,000 $ ,115,000 $ ,120,000 $ ,405,000 $ ,155,000 Sugarcane 2 Average Price ($/lb) Average Yield (lbs/harv. acre) Acreage Harvested $ , ,444 $ , ,286 $ , ,409 $ , ,970 $ , ,952 Wheat 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,000 $ ,000 $ ,000 $ ,000 $ ,000 1 Season average market prices, production yields and harvested acreage obtained from NASS, USDA. 2 Market prices and production yields for sugarcane are in terms of raw sugar. Raw sugar market prices, sugar yields per harvested acres and harvested acreage obtained from LSU Agricultural Center s Ag Summary Report. 34

38 Table B-1. Season Average Prices, Production Yields and Harvested Acreage for Major Agronomic and Horticultural Crops, Louisiana, (continued) Crops Average Southern Peas 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,310 $ ,203 $ ,775 $ ,888 $ ,044 Strawberries 1 Average Price ($/flat) Average Yield (flats/harv. acre) Acreage Harvested $ $ , $ , $ , $ , Sweet Potatoes 1 Average Price ($/bu) Average Yield (bu/harv. acre) Acreage Harvested $ ,620 $ ,730 $ ,322 $ ,494 $ ,792 Tomatoes 1,2 Average Price ($/lug) Average Yield (lugs/harv. acre) Acreage Harvested $ , $ , $ , $ , $ , Watermelons 1 Average Price ($/cwt) Average Yield (cwt/harv. acre) Acreage Harvested $ ,495 $ ,498 $ ,246 $ ,120 $ ,340 1 Season average market prices, production yields and harvested acreage obtained from LSU Agricultural Center s Ag Summary Report for Lug = 20 pound box. 35

39 Table B-2. Season Average Prices for Beef and Dairy Production, Louisiana, Crops Average Beef (Cow-Calf) 1 Calves ($/cwt) Cull Heifers ($/cwt) Cull Animals ($/cwt) $ $ $64.63 $ $ $78.70 $ $ $78.52 $ $ $ $ $ $ Dairy 2 Milk ($/cwt) Bull Calves ($/cwt) Cull Heifers ($/cwt) Cull Animals ($/cwt) $21.60 $25.00 $93.00 $48.50 $19.80 $25.00 $ $53.00 $21.71 $25.00 $ $75.00 $26.55 $50.00 $ $75.00 $22.42 $31.25 $ $ Beef prices obtained from LSU Agricultural Center s Ag Summary Report, Milk prices obtained from LSU Agricultural Center s Ag Summary Report, Cull dairy livestock prices taken from LSU Department of Agricultural Economics Dairy Costs and Returns Reports. 36

40 APPENDIX C INTEREST RATES AND CALCULATION OF CAPITALIZATION RATE,

41 Table C-1. U.S. Treasury Security Rates, Item / Year Average 3 Month Month Year Year Year Year Year Year Year Source: H.15, Selected Annual Interest Rates, U.S. Government Securities, Treasury Constant Maturities, Nominal. Website: Table C-2. Average Fixed Rates, Long-term Agricultural Real Estate Loans, Eleventh (Dallas) Federal Reserve District, Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Average n/a 5.83 Average 6.17 Source: C.4. Agricultural Finance Databook. Federal Reserve Statistical Release, Federal Reserve Bank of Kansas City. Website: n/a Not available 38

42 Table C-3. Calculation of Capitalization Rate Property Turnover Rate Between Item 3 and 6 Months Property Turnover Rate Between 6 and 12 Months Property Turnover Rate Between 12 and 24 Months Safe Rate Risk Rate Illiquidity Rate Capitalization Rate Safe rate = the four-year average rate for 30-year U.S. securities. 2 Risk Rate = the difference between the four-year average of 30-year U.S. securities and the four-year average fixed rate for long-term agricultural real estate loans. 3 Illiquidity Rate = the difference between the four-year average yields of the two U.S. securities that span the midpoint of time that a property is on the market before it is sold. The table presents three time periods: 1) 3-6 months, 2) 6-12 months, 3) months. 4 Capitalization rate = safe rate + risk rate + illiquidity rate. 39