What is Happening with Iowa s Land Values: Results from ISU s Latest Survey

Transcription

1 What is Happening with Iowa s Land Values: Results from ISU s Latest Survey Dr. Wendong Zhang Assistant Professor of Economics and Extension Economist Ag Bankers Conference, March 22, 2016

2 A Quick Introduction: Dr. Wendong Zhang Dr. Mike Duffy can never be replaced Grown up in a rural county in NE China Attended college in Shanghai and Hong Kong Ph.D. in Ag Econ in 2015 from Ohio State 2012 summer intern at USDA-ERS on farm economy and farmland values Research and extension interests: land value, land ownership, agriculture and the environment, China Ag

3 3, ,000.0 Why Care About Farmland Market? Distribution of U.S. Farm Assets 2,500.0 Billion $ 2, , , F Real estate Livestock and poultry Machinery and motor vehicles Crops stored Purchased inputs Financial assets Source: USDA ERS

4 Current Situation of Iowa Farmland Market

5 STATEWIDE AVERAGE $7,633 down -3.9% down -$310

6 AVERAGE VALUES all farmland Nominal vs. Inflation Adjusted Iowa Farmland Values Land values ($/acre) Nominal Real Year

7 % Change in Iowa Farmland Values % 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0%

8 US Farm Income Source: USDA OCE

9 Iowa Corn Prices vs. Costs Source: Chad Hart, Mike Duffy

10 Iowa Soybean Prices vs. Costs Source: Chad Hart, Mike Duffy

11 Iowa Land Values by District and County

12 Not Every Iowa District Are Created Equal

13 Land Values by District and Land Quality, 2015 District Average Value % Change High Quality % Change Medium Quality % Change Low Quality % Change Northwest $9, % $11, % $8, % $6, % North Central $7, % $8, % $7, % $5, % Northeast $7, % $9, % $7, % $5, % West Central $8, % $9, % $7, % $5, % Central $8, % $10, % $7, % $5, % East Central $8, % $10, % $7, % $5, % Southwest $6, % $8, % $6, % $4, % South Central $4, % $6, % $4, % $2, % Southeast $6, % $9, % $6, % $3, % State Avg. $7, % $9, % $7, % $4, %

14 Livestock and Crop Inventory by District Chickens, Layers Inventory 2012 Harvested Acres 2015 Hogs Milk Cows Cattle Corn Soybean Northwest 30% 26% 29% 22% 15% 16% North Central 64% 16% 4% 6% 14% 13% Northeast 1% 12% 51% 16% 12% 8% West Central 0% 13% 1% 13% 15% 16% Central 3% 13% 1% 7% 15% 14% East Central 1% 5% 10% 11% 10% 10% Southwest 0% 2% 0% 9% 7% 9% South Central 0% 2% 1% 9% 4% 5% Southeast 1% 11% 3% 6% 7% 8% State Inventory 20.4 million 20.4 million 0.17 million 2.34 million 13.2 million 9.8 million

15 Crop and Livestock Prices Source: Chicago Fed

16 Iowa Farmland Sale Activity since November 2014 More Less Same Percent Northwest North Central Northeast West Central Central East Central Southwest South Central Southeast STATE

17 Iowa Land Values by County 2015

18 Iowa Land Value % Change by County

19 Iowa Farmland Purchases by Buyer Types % 80% 70% 60% 50% 40% 30% 20% 10% 0% Existing Farmers Investors New Farmers Other

20 Iowa Method of Sale Method Public Auction 37% 47% 50% 47% 53% 48% Realtor 28% 21% 18% 18% 18% 23% Private 28% 21% 24% 30% 24% 23% Sealed Bid 7% 10% 8% 5% 5% 6% Other 1% <1% <1% <1% <1% <1% Source: Jim Knuth, FCS

21 Farmland Market is Very Thin! Annual Agricultural turnover ratio Blue: <0.5% Red: 1.5-2% Illinois <0-3%>

22 Looking Across States and Looking Ahead

23 Beyond Iowa Farm real estate values by state; % change from 2014 Source: USDA-NASS

24 Changes in Land Values Across the Midwest Source: Chicago Fed

25 Farmland Values Predictions in the Next Year District Increase 5% or more Increase 0-5% Stay the same Decrease 0-5% Decrease 5-10% Decrease 10% or more PERCENT Northwest North Central Northeast West Central Central East Central Southwest South Central Southeast STATE

26 2016/17 Crop Margins Source: Chad Hart

27 Farmland Values Predictions in Five Years District Increase 5% or more Increase 0-5% Stay the same Decrease 0-5% Decrease 5-10% Decrease 10% or more PERCENT Northwest North Central Northeast West Central Central East Central Southwest South Central Southeast STATE

28 Crop Prices for the Next Decade Source: USDA-OCE

29 A Bust of Farmland Market Bubble? A Replay of 1980s Farm Crisis?

30 The Bubble that Wasn t? Farmland values drop as commodity prices fall Iowa Farmland Values vs. Commodity Prices Farmland Values ($/Acre) Season-Average Commodity Prices ($/bushel) Year Nominal Farmland Values Corn Season-Average Price Soybean Season-Average Price

31 Net Cash Farm Income vs. Nominal Farmland Values Source: USDA-ERS, Ag DM C2-70

32 Iowa Ag Real Estate Values Source: USDA-NASS; Ag Census

33 Land Values and Income: Growth Source: USDA-ERS, Ag DM C2-70

34 Land Values and Income: Growth Source: USDA-ERS, Ag DM C2-70

35 Capitalization Rate (Cap Rate) Rent to Value Ratio

36 Farmland Values vs. Capitalized Land Values

37 S&P 500 vs. Farmland Values: A Question of Timing 1960 Source: Mike Duffy Ag DM Newsletter June 2014

38 S&P 500 vs. Farmland Values: A Question of Timing 1980 Source: Mike Duffy Ag DM Newsletter June 2014

39 S&P 500 vs. Farmland Values: A Question of Timing Return to S & P Investment Relative to Iowa Farmland Investment Source: Mike Duffy Ag DM Newsletter June 2014

40 Implications for Ag Bankers

41 Credit Conditions Have Gradually Deteriorated Source: Nathan Kauffman, Fed Reserve. Kansas City

42 Index of Repayment Rates for Ag Loans Source: Fed Reserve. Chicago

43 Source: Nathan Kauffman, Fed Reserve. Kansas City

44 Source: Nathan Kauffman, Fed Reserve. Kansas City

45 Source: Nathan Kauffman, Fed Reserve. Kansas City

46 Source: Nathan Kauffman, Fed Reserve. Kansas City

47 US Farm Debt to Asset Ratio Source: Randy Schnetpf, USDA FAS

48 US Farm HH Income vs. Avg. HH Source: Randy Schnetpf, USDA FAS

49 Iowa Farmland Value Portal

50 Iowa Farmland Value Portal

51 Iowa Farmland Value Portal ww.card.iastate.edu/ farmland

52 Thank You! Wendong Zhang Assistant Professor and Extension Economist 478C Heady Hall Iowa State University