A Look at Key Variables in the U.S. Ag Economy: Land Prices, Input Costs, and Government Payments

DTN Executive Editor Marcia Zarley Taylor reported yesterday that: “Average Illinois farmland tumbled 8% in calendar 2015, according to the Illinois Society of Professional Farm Managers and Rural Appraisers, the second year in a row of a decline.

“According to the most recent Iowa Realtors Land Institute survey, Iowa’s average tillable farmland has fallen 22% from its peak in March 2013. That’s a plunge from $8,690/acre three years ago to $6,732/acre on March 1, 2016. Prices in the past year slipped an average of 8.7%, the realtors estimate.

“The Peak Soil Iowa Farmland Index published by DTN shows a smoother glide path. It is based on a 30-day moving average of actual sales transactions, adjusted for a Corn Suitability Rating of 60 for average land quality. Through the end of March, it pegged CSR 60 land at $8,055/acre, a mere 12% reduction from the 2013 all-time peak, but virtually no change from a year ago. (DTN subscribers see the Farm Finance page for the weekly rotating charts of the six Midwest states we monitor.)”

The DTN update added that, “Appraisers contend that ‘hot’ land markets will be quickest to cool when corrections occur. But outside that bellwether corn states of Iowa, Illinois and perhaps Indiana, many Midwest locales are holding their own, other land experts contend.

“A study by Louisville-based Farm Credit Mid-America appraisers recently analyzed 4,000 land sales from 2015 and compared them to over 100,000 land sales in their proprietary historical database. The study’s timeframe focused on calendar 2015, so wasn’t as recent as the Iowa Land Institute study.

Three of the four states in Mid-America’s territory actually showed slight gains in calendar 2015; only Indiana showed a decline of 3%. Gains were 3% for Kentucky, 2% for Tennessee and 0.2% for Ohio.”

Meanwhile, in a separate DTN article from last week, Ms. Taylor pointed out that, “Landlords won round one in cash rent negotiations for 2016 with minimal concessions. Unfortunately for growers struggling to lower break evens, savings on inputs like seed, fertilizer and crop protection chemicals also faltered, if real-time data from Granular and other data management companies is any indication.

“Granular benchmarked actual expenses for its customer base on more than 1 million crop acres this spring, comparing costs for specific products and seed hybrids to 2015 spending. By that measure, chemical costs fell a modest 9%, fertilizer only 8% and seed a mere 1% for Granular customers. Individual items like Roundup PowerMAX tumbled 12% compared to 2015, somewhat steeper than the industry average, Granular Co-Founder Mike Preiner told DTN.”

And Bloomberg writer Alan Bjerga reported yesterday that, “The agriculture slump is getting so bad in the U.S. that farmers are about to get more government aid than at any time in the past decade, signaling the rising public cost of crop surpluses and cheap food.

“About $13.9 billion of net farm income this year will be federal payments, or about 25 percent of total profit estimated at $54.8 billion, according to estimates by the U.S. Department of Agriculture. That’s the biggest payout and highest ratio since 2006, as programs authorized by Congress two years ago cost more than originally forecast.”

The Bloomberg article noted that, “‘This is a sign of a weak farm economy that is much weaker than even a couple years ago,’ said Patrick Westhoff, director of the Food & Agricultural Policy Research Institute at the University of Missouri in Columbia.”

Mr. Bjerga added that, “Lawmakers in agricultural states are still looking for ways to provide a safety net for farmers. One such request is to have the USDA allow cottonseed, which is used for oil or meal rather than fiber, to be added to the list of commodities covered under new farm programs. Agriculture Secretary Tom Vilsack has said such a move isn’t legally possible.”

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