Farmland Values & Cash Rent Craig Dobbins. 2011 Purdue Land Value Survey Cash Rent Results.

Farmland Values & Cash Rent

Craig Dobbins

2011 Purdue Land Value SurveyCash Rent Results

Land Yield Value ($/a) % Quality Bu/A 2010 2011 Change

Top 188 202 230 13.9%

Aver. 157 161 182 13.0%

Poor 126 124 141 13.7%

Average Quality Cash Rent, 1975 - 201119

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

11

0

50

100

150

200

250

300

350

Nominal Inflation Adj. (2011)

Year

Valu

e pe

r acr

e

Cash Rent Comparison2002 - 2006 & 2007 - 2011

1 2 3 4 50.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Percent change in average farmland cash rent

2007-112002-06

Perc

ent c

hang

e

Cash rent per bu. – Average soil

1970 1975 1980 1985 1990 1995 2000 2005 2010 20150.55

0.65

0.75

0.85

0.95

1.05

1.15

1.25

Year

$/B

u.

Preliminary 2011 Purdue Land Value Survey – Land Value Results

Land Yield Value ($/a) % Quality Bu/A 2010 2011 Change

Top 188 5,310 6,521 22.8%

Aver. 157 4,419 5,468 23.7%

Poor 126 3,501 4,368 25.3%

Average Quality Land Value, 1970 - 201119

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

11

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Nominal Inflation Adj. (2011)

Year

Valu

e pe

r acr

e

Comparison of Change in Farmland Value2002 – 2006 & 2007 - 2011

1 2 3 4 50.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Percent change in average farmland cash rent

2007-112002-06

Perc

ent c

hang

e

Farmland Value per Bu. of CornAverage Land

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Value/Rent multiple – Average land

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

7

12

17

22

27

32

Year

Value/Rent Multiple

+2 STD

Mean

Mean = 18.6

Current = 30.1

2012 Projections - Prepared August 10, 2011Item Rotation Corn Rotation Soybeans

Per acre Per bu. Per acre Per bu.

Yield 161 49

Price $5.90 $5.90 $12.40 $12.40

Direct payment $26.00 $0.16 $14.00 $0.29

Gross Revenue $976 $6.06 $622 $12.70

Production cost $462 $2.87 $246 $5.02

Contribution margin $514 $3.19 $376 $7.67

Machinery overhead $80 $0.50 $80 $1.63

Labor $39 $0.24 $39 $0.80

Return to land & risk $395 $2.45 $257 $5.24

2011 Cash rent – average land $187 $1.16 $187 $3.82

Profit $208 $1.29 $70 $1.42

New Price PlateauCorn ($/bu.) Soybeans ($/bu.)

$6.70 $17.56

$4.60 $10.58

$3.00 $7.51

Source: Dr. Scott Irwin

New Price Plateau

ItemRotation

Corn RotationRotation Soybeans

Per acre Per acre

Yield 161 49

Price $4.60 $10.58

Direct payments $26.00 $14.00

Gross Revenue $767 $532

Production cost $468 $246

Contribution margin $299 $286

Machinery & labor overhead, & 2011 rent $306 $306

Loss $7.00 $13.50 $20.00

No direct payments $33.50

Farmland ValueScenario Return to land Value/income

multipleFarmland value

Continue estimated 2012

$340 30 $10,200

New price plateau $174 30 $5,220

Annual Percent Change in Average Land 1972 - 2011

19

72

- 7

3

19

73

- 7

4

19

74

- 7

5

19

75

- 7

6

19

76

- 7

7

19

77

- 7

8

19

78

- 7

9

19

79

- 8

0

19

80

- 8

1

19

81

- 8

2

19

82

- 8

3

19

83

- 8

4

19

84

- 8

5

19

85

- 8

6

19

86

- 8

7

19

87

- 8

8

19

88

- 8

9

19

89

- 9

0

19

90

- 9

1

19

91

- 9

2

19

92

- 9

3

19

93

- 9

4

19

94

- 9

5

19

95

- 9

6

19

96

- 9

7

19

97

- 9

8

19

98

- 9

9

19

99

- 0

0

20

00

- 0

1

20

01

- 0

2

20

02

- 0

3

20

03

- 0

4

20

04

- 0

5

20

05

- 0

6

20

06

- 0

7

20

07

- 0

8

20

08

- 0

9

20

09

- 1

0

20

10

- 1

1

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Year

Per

cen

tag

e

Continue Higher

• Strong demand for corn from the ethanol industry because of biofuel mandates

• Strong soybean export demand • 2011 U.S. corn and soybean crop that is average or

below average• Moderate increases in input costs for corn and

soybeans, keeping crop production margins well above historic average

• Low long-term interest rates • Little change in the amount of land available for sale

Steady or Decline• Sharp decline in corn and/or soybean export demand• Sudden change in the U.S. policy away from providing biofuel

subsidies and mandating usage• Sharp rise in interest rates because of a downgrade in the credit

rating of U.S. government debt obligations or increased inflation fears• Exceptionally large 2011 corn and soybean crop • Sharp rise in crop input prices reducing crop production margins• Further slowing of world growth because of sovereign debt problems,

including the U.S.• Strong supply response resulting from new capital investments in

agricultural production• U.S. recession• Some combination of the above or some unknown development