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1/25/2016
1
Kansas Agricultural
Land Rental Rates
Mykel Taylor
Department of Agricultural Economics
Clay Center, KSJanuary 11, 2016
RENTS AND NET FARM INCOME
Returns to Farming
Source: KS Farm Management Association
Updated: Returns to Farming
Source: KS Farm Management Association
Cash Rents
Source: USDA-NASS
Rental Rates
• Survey results tend to lag market due to
– Survey reflect average rents paid (masks quality
differences)
– Doesn’t consider when the rental rates were
negotiated
–May include non-market activities
• Are there alternatives to the USDA-KASS
survey?
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2
Projected Rental Rates
• Another way to obtain an estimate of cash
rental rates for cropland
– Budgeting approach that reflects expected returns
to farming
–Marginal rental rate versus average rental rate
• Calculate crop share revenues based on long-
term profit expectation
Projected Rental Rates
• Crop share revenues
– Used predicted crop share % obtained by budgets
using current inputs costs and production practices
– County-level yields from a 20 year trend
– Expected cash prices from futures and local basis
• Biggest different between 2014 and 2016 cash
rent projections…
• Expected crop prices dropped significantly
between 2014 and 2016
Projected Rental Rates
Year
Harvest Futures Prices ($/bu)
Wheat Corn SoybeansGrain
Sorghum
2014 $7.02 $4.71 $11.45 $4.71
2015 6.09 4.19 10.09 4.19
2016 5.46 4.04 8.88 4.04
$ change -1.56 -0.67 -2.57 -0.67
Note: Prices are the average price of harvest futures contracts in preceding November
Non-Irrigated Rental Rates
Region2014 KSU ($/ac)
2015 KSU ($/ac)
2016 KSU ($/ac)
Northwest 70.90 38.75 19.59
West Central 65.51 30.18 13.08
Southwest 57.29 22.03 7.38
North Central 102.55 69.31 37.26
Central 86.27 53.79 26.73
South Central 69.29 42.61 19.38
Northeast 167.65 119.50 78.24
East Central 103.84 63.84 34.80
Southeast 55.83 31.64 9.99Source: Taylor, 2015
2016 values are not final!
Projected Rental Rates
• What do they represent?
• Budgeting approach with expected prices and
county yields gives an estimate of
–What a representative farmer could afford to pay
• Ignores
–Working capital (carry over from previous years)
– Debt obligations and other cash outlays
– Profits from owned land being reallocated
Non-Irrigated Rental Rates
Region2014 KSU ($/ac)
2015 KSU ($/ac)
2016 KSU ($/ac)
Northwest 70.90 38.75 23.00
West Central 65.51 30.18 15.40
Southwest 57.29 22.03 8.70
North Central 102.55 69.31 38.14
Central 86.27 53.79 31.45
South Central 69.29 42.61 22.80
Northeast 167.65 119.50 92.00
East Central 103.84 63.84 41.00
Southeast 55.83 31.64 11.70Source: Taylor, 2015
2016 values are not final!
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3
Non-Irrigated Rental Rates
NC District 2013 2014 2015 2016Clay 94.60 115.80 79.90 43.60
Cloud 89.20 108.80 75.10 41.30
Jewell 92.40 109.10 75.40 41.60
Mitchell 87.30 105.40 72.80 40.10
Osborne 76.90 86.00 59.50 32.90
Ottawa 74.70 92.50 63.70 34.90
Phillips 77.70 84.00 57.90 32.10
Republic 95.50 115.60 79.50 43.70
Rooks 66.80 66.20 45.70 25.30
Smith 87.20 98.60 68.10 37.60
Washington 102.30 123.00 84.80 46.40
Average: $85.87 $100.45 $69.31 $38.20
Returns to Land
• Has every farmer dropped their cash rents for
2016?
• Answer: No, but they are starting to…
• What is keeping the adjustment from
occurring quickly?
Returns to Land
• Residual cash from better revenue years will
allow farmers to be competitive a little longer
– Neighbors with more carry-over cash will keep
bids high
– But adjustments will occur if commodity prices
remain low
• Contracts length in Kansas averages 3 to 5
years
– Farmers are locked in for the short run
– Adjustments will be made as the contracts are
renewed
$94.60
$115.80
$79.90
$43.60
$0
$20
$40
$60
$80
$100
$120
$140
2013 2014 2015 2016
Rent ($/ac)
Rents and Net Farm Income
• Projected non-irrigated cash rents for Clay
County:
22%
-31%
-45%
PASTURE RENTAL RATES
• Pasture rents are at historic levels
– Jump in rent driven by high cattle prices
Pasture Rental Rates
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4
Pasture Rental Rates
• Different way to approach pasture rent
questions
– Start with assumption that not all pasture is
created equal
– Gain flexibility from changing range conditions
and market prices
– Give landowners and tenants a way to estimate
the value of good pasture
Pasture Resources
• A new pasture lease pricing tool is available at
– www.AgManager.info
– Collaborative effort with NRCS
• Contact information
–Mykel Taylor: mtaylor@ksu.edu
– Robin Reid: robinreid@ksu.edu
PROPERTY TAX OUTLOOK
Property Tax Computations
• Defined as the eight year average of eight year
average of returns to landlord
– This eight year average is then capitalized at the
statute-defined capitalization rate (11-12%)
– Process places a weight on middle years of the eight
year window
• Designed to have a more smoothing effect on
tax values
– Removes variability in annual changes in returns
• Landlord net return comprised of last 15 years
of returns to the landlord
Non-irrigated Single Year
$0
$10
$20
$30
$40
$50
$60
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Landlord Return for Barton County (Central)
Source: Featherstone, 2015
Property Tax Computation
0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Eight-year average of an eight-year average
Source: Featherstone, 2015
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5
Property Tax Computation
Eight-year average of an eight-year average
$0
$10
$20
$30
$40
$50
$60
0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Weight Landlord Return
Source: Featherstone, 2015
Impact of Moving Forward
$26.69
$19.64
$28.59
$24.65
$27.82
$28.98
$11.56
$6.73
$8.61
$27.96
$20.21
$31.43
$26.53
$28.85
$31.17
$12.46
$7.26
$9.65
$0
$5
$10
$15
$20
$25
$30
$35
Barton Sumner Marshall Anderson Butler Jewell Ford Greeley Thomas
2012 2013
4.8% 2.9% 4.5% 7.6% 3.7% 7.6% 7.8% 7.9% 12.1%Percent Change:
Source: Featherstone, 2015
Property Tax Issues
• Look for more information on this coming
soon
–Webinar with Dr. Allen Featherstone
– Additional materials with county-level estimates
Kansas Agricultural
Land Values and Rental
Rates
Mykel Taylor
www.AgManager.info
mtaylor@ksu.edu
Online Resources
• 2014 Kansas Agricultural Land Valueshttp://www.agmanager.info/farmmgt/land/county/CountyValues_Apri
l_2015.pdf
• 2014/15 Rental Rates for Non-Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyNon-
irrigatedRents(Jan2015).pdf
• 2014/15 Rental Rates for Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyIrrigatedRe
nts_Feb-2015.pdf
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6
Kansas Agricultural
Land Values
Mykel Taylor
Department of Agricultural Economics
Ag Profitability ConferenceColby, KS
January 6, 2016
AG LAND VALUES FROM SURVEYS
2015 Cropland Values 2015 Pasture Values
Kansas Land Values
Source: USDA-NASS
Rent-to-Land Value Ratio
Source: USDA-NASS
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7
MARKET-BASED LAND VALUES
• Source for market transaction data
– Property Valuation Department, Topeka
• 2010-2014 and 2015 (Q1-Q2) sales data
– STR location
– Acres in sale
–Mixture of irrigated, non-irrigated and pasture
– Soil types found on parcel
– 20-year average rainfall by section
– Enrollment in government set-asides
– Value of improvements
Kansas Land Values
PVD Sales Data 2010-14
2014 Average
Acres in Sale, 2014 229.7
CRP Contracts, 2014 1.80%
Sales Per County, 2014 15.0
All Years
Total Sales Transactions: 8,743
2014 17.8%
2013 16.1%
2012 19.3%
2011 20.5%
2010 26.3%
PVD Sales Data 2010-15 (Q1-2)
All Years Average
Acres in Sale 156.3
CRP Contracts 1.50%
Sales Per County 136.9
Total Sales Transactions: 14,374
All Years % of Total Total Acres
2015 Q1-Q2 10.2% --
2014 15.7% 354,356
2013 16.0% 362,948
2012 17.0% 383,119
2011 17.6% 401,975
2010 23.3% 518,322
PVD Sales Data 2014 & 2015 Q1-2
2014Average
$/ac
% of All
Transactions
Non-Irrigated $2,730 54.7%
Irrigated $3,464 4.9%
Pasture $2,035 40.4%
All Cropland and Pasture $2,743 100%
2015 Q1-Q2Average
$/ac
% of All
Transactions
Non-Irrigated $2,289 47.6%
Irrigated $3,484 11.3%
Pasture $1,765 41.1%
All Cropland and Pasture $2,513 100%
Land Model
Land Type
2014 Data Sample
Average $/ac
2014 USDA-
NASS $/ac
Non-Irrigated $2,833 $2,150
Irrigated $3,478 $3,280
Pasture $1,991 $1,300
• Use of a regression model to estimate land values
– Alternative to summary statistics (average, range)
– Accounts for variability in land found in sample
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8
LAND MODEL RESULTS
Land Model Results
Source: Taylor, 2015
$1,608
$1,920
$2,381
$2,822$2,990
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2010 2011 2012 2013 2014
Estim
ated Value ($/ac)
Non-Irrigated Cropland
Land Model Results
$1,490$1,694
$2,077
$2,448 $2,504$2,652
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2010 2011 2012 2013 2014 2015Q1-Q2
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
Land Model Results
Source: Taylor, 2015
$2,660
$3,526
$4,706 $4,761
$5,169
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2010 2011 2012 2013 2014
Estim
ated Value ($/ac)
Irrigated Cropland
Land Model Results
$2,659
$4,302
$5,750
$5,082
$5,977
$6,945
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2010 2011 2012 2013 2014 2015Q1-Q2
Land Sale Price
($/acre)
Time Period
Irrigated Cropland State Average
Land Model Results
Source: Taylor, 2015
$1,092$1,238
$1,437
$1,658$1,802
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2010 2011 2012 2013 2014
Estim
ated Value ($/ac)
Pasture Land
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9
Land Model Results
$945
$1,243$1,333
$1,486
$1,660
$1,818
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2010 2011 2012 2013 2014 2015Q1-Q2
Land Sale Price
($/acre)
Time Period
Pasture State Average
2014 Non-Irrigated Land Values
$2,296
$2,060
$1,472
$3,239
$2,825
$2,852
$5,133
$3,888
$3,140
2014 Pasture Land Values
$1,385
$1,242
$887
$1,953
$1,703
$1,720
$3,095
$2,344
$1,893
2014 Irrigated Land Values
$5,970
$5,413
$3,389
---
---
$6,008
---
---
---
Land Value Trends
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013 2014 2015
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
Land Value Trends
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013 2014 2015
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
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10
Land Value Trends
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013 2014 2015
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
Land Model Results
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013 2014 2015
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
Land Model Results
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013 2014 2015
Land Sale Price
($/acre)
Time Period
Non-Irrigated CroplandState Average
Land Price Expectations
• Actual land sales are not falling off as quickly
or dramatically as we expected
• Lender’s surveys and USDA surveys indicated
an expectations of lower land values
• Not showing up in the data. Why?
– Slowdown hasn’t happened yet
– I can’t measure no-sales
Land Model Results
Source: Taylor, 2015
0
1,000
2,000
3,000
4,000
5,000
6,000
Va
lue
, $
/acr
e
KS-PVD
USDA-NASS
Pasture Non-irrigated Irrigated
Land Model Results
Year
Non-
Irrigated Irrigated Pasture
Annual % Change in Value
2010-11 19% 33% 13%
2011-12 24% 34% 16%
2012-13 19% 1% 15%
2013-14 6% 9% 9%
1/25/2016
11
LAND VALUE PROJECTIONS
Returns to Farming
Forecasting Land Values
• Based on an estimated model for Kansas land
values, the one-year multiplier for net farm
income for acre was 1.50
– The long-run multiplier is 21.71 or an implied
capitalization rate of 4.61%
• At the projected net farm income per acre of
$53…
– Projected long-run Kansas land price is $1,151 a
decline of 43.3% $0
$500
$1,000
$1,500
$2,000
1880
1885
1890
1895
1900
1905
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Land Value ($/acre)
KS Farmland Value
Geometric Growth
Forecasting Land Values
Geometric growth rate = 3.4%
$0
$500
$1,000
$1,500
$2,000
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Land Value ($/acre)
KS Farmland Value
Geometric Growth
Forecasting Land Values
Geometric growth rate = 3.95%
$0
$500
$1,000
$1,500
$2,000
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Land Value ($/acre)
KS Farmland Value
Geometric Growth
Forecasting Land Values
Difference in value =
-30% to -50%
How long to get there?
2015 Value = $2,030/ac
1/25/2016
12
Kansas Agricultural
Land Values and Rental
Rates
Mykel Taylor
www.AgManager.info
mtaylor@ksu.edu
Online Resources
• 2014 Kansas Agricultural Land Valueshttp://www.agmanager.info/farmmgt/land/county/CountyValues_Apri
l_2015.pdf
• 2014/15 Rental Rates for Non-Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyNon-
irrigatedRents(Jan2015).pdf
• 2014/15 Rental Rates for Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyIrrigatedRe
nts_Feb-2015.pdf
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