Minutes Champaign 2013 - ncfmc.org · FBFM – Dwight Rabb and Brad Zwilling gave a summary of the...
Transcript of Minutes Champaign 2013 - ncfmc.org · FBFM – Dwight Rabb and Brad Zwilling gave a summary of the...
North Central Extension Farm Management Committee Minutes: Sept 26‐27, 2013.
Members attending: Kevin Dhuyvetter ( KSU), William Edwards (ISU), Gary Schnitkey (U of IL), Mykel
Taylor (KSU), Gregg Ibendahl (KSU), Kenny Burdine (U of KY), William Lazarus (U of MN), Ray Massey (U
of MO), Dwight Aakre (NDSU), Barry Ward (OSU), Michael Langemeier ( Purdue), Arlin Brannstrom (UW),
John Molenhuis (OMAFRA), Dale Nordquist (CFFM), Brad Lubben ( NCERMC).
Recorder – AJB
Minutes of June 2013 meeting reviewed and approved.
Brannstrom led a discussion of structural and entity changes in the dairy industry. Number of dairy
producers declined by nearly 35% while the number of milk permit holders conducting business as
multi‐owner entities jumped from less than 100 to more than 2,000 in the past decade. Several states
are seeing similar trends in large grain and other livestock operations.
Based upon these rapidly changing farm conditions, it was agreed that there is a critical need for farm
personnel management throughout the region. Employee health care, communications skills, recruiting
and Hispanic labor needs were cited as areas of perceived need. However, none of those attending the
meeting felt particularly capable or comfortable programming in this area. Retired faculty Bernie Irvin
and Bob Milligan are still being used in some regional workshops. FBMA and other associations are
offering programs on personnel management. This may need to be outsourced to private sector or
perhaps the subject of another regional grant. AgHelpWanted.com (website developed via support
from the Western Center for Risk Management Education) was identified as a resource for personnel
management information.
A brief AAEA Section report was provided by Ray Massey & Michael Langemeier. Extension section
meetings in Washington were well attended and popular. There will be approximately three sessions
available again for the 2014 meetings in Minneapolis. Call for track sessions will be announced in late
October.
2014 Meeting will be in Minneapolis July 27‐29. Choices will be seeking article submissions for an issue
of the magazine with the theme of “150 years of Land Grant System.” Possible example – evolution of
land values. Mykel Taylor indicated she was willing to do major writing task, but is seeking others willing
to contribute.
Illinois report – FarmDoc & FBFM
FarmDoc – Darrell Good (along with Gary Schnitkey) demonstrated and discussed the FarmDoc Daily
website which has been running for 2.5 years. He cited four keys to their success: 1) Leadership with a
vision (Scott Irwin), 2) Manager responsible for technical support (Mark Althaus – full time employee), 3)
Core group of faculty and staff committed to contributing relevant articles on a regular basis (have 8‐10
primary contributors), and 4) Continuous funding source. The core budget for FarmDoc Daily is
approximately $150K/yr. He emphasized the need for a dedicated team of contributors to keep the
daily feed going, this includes several people from other institutions (Chris Hurt at Purdue and Carl
Zulauf at OSU). Current funding ‐ some institutional funding, some grant funding, sponsorships. TIAA –
CREF sponsorship.
The Outlook newsletter is always included on Mondays and has a large readership from biofuels and
foreign sources. FarmDoc Daily is considered the main outreach activity of the department and they are
conducting fewer face to face meetings than in the past. FarmDoc Daily has no editorial reviewers and
articles are usually less than two pages in length. FarmDoc Daily is viewed as a complimentary activity
to the FarmDoc website that includes FAST decision tools and other resources.
FBFM – Dwight Rabb and Brad Zwilling gave a summary of the Illinois FBFM record keeping and business
analysis program. The organization operates as a non‐profit with very limited in‐kind contributions from
the University. There are currently 59 staff working with 5,688 cooperators. They do tax returns for 98‐
99% of the cooperators. A fall field staff conference will focus on strategic planning for the organization.
The professional staff is 75% enrolled agents moving to 85% by this fall. Most cooperators are full time
farmers. In addition to working with producers, the staff works with retired landlords. Typically the
staff meets with individual farmers 4‐5 times throughout the year.
The Association is independent from U of I, but they have a close working relationship – Dwight and
Brad have offices in Mumford Hall. FBFM is comprised of local associations that operate under the
umbrella of the state association, which is organized as a not‐for‐profit. Association employees work
out of local offices, usually with two field staff per office.
AgLEASE 101 Grant Update
Brannstrom reviewed the recent traffic from the AgLease101 website over the past 12 months. More
than 14,000 unique visitors generated over 45,000 page hits. The committee has updated the cash, crop
share, pasture, and beef cow leasing publications. They also conducted two train‐the‐trainer national
webinars, attracting nearly 200 attendees and distributed 1,100 printed copies of the publications as file
resources. The 2013 grant will continue adding updated publications and conduct additional train‐the‐
trainer webinars.
Specific activities identified for this year include: 1) a survey of regional building rental rates, 2)
examples of flex rent arrangements, 3) additional train‐the‐trainer webinars, 4) updated equipment
rental guide, 5) “Request For Bid” fact sheet for landowners, and 6) example operator newsletters and
resumes.
Brannstrom will be working with Aakre and Ward on the fact sheets. He will be scheduling dates and
coordinating with all committee members about details of this cycle of lease topics for the train‐the‐
trainer webinars.
University of Illinois TIAA CREF Land Center
Bruce Sherrick (U of IL) provided an update on the activities of the new TIAA CREF Land Research Center.
TIAA CREF holds approximately $4 billion of farm land (out of $523 billion in total assets managed).
USDA estimates the total value of U.S. farmland to be $2.4 trillion. TIAA CREF is building a portfolio of
farm land. TIAA CREF funded a research center that will focus on farmland as an asset class. The Land
Center will start by consolidating large datasets. There will be a soft launch of a website soon. Sherrick
said they will be developing a farm land purchase module and possibly a lease evaluation app. The
Center will conduct a conference for large landowners. The Center staff is comprised of Dr. Sherrick,
Todd Kuethe (formerly with USDA ERS), and several partial FTE’s (most of the contributors to FarmDoc
Daily have a small appointment with Land Center). TIAA CREF purchased the Westchester Group (farm
management firm) a few years ago.
North Central Extension Risk Management Center Update/Report – Brad Lubben
There were 16 projects for approximately $650,000 awarded by the Center for 2013. Three proposals
focused on Farm Bill education projects were approved conditionally. If a Farm Bill is not passed by
March 1, 2014, the pool of money available for grants in 2014 will increase to approximately $750,000.
The advisory committee recently met to establish needs assessment topics for the next funding cycle.
The Center Council looks for measureable action when considering proposals. Leasing economics, rent
versus ownership analysis, and interest rate risk were all identified as important topics. Personnel
management education, specifically as it relates to health care and immigration, was also mentioned as
an area of need.
Brad also stated that the Center will be announcing a limited number of small planning grants to help
fund development teams travel costs in the coming cycle.
Brad reported that the Trade Assistance Act (TAA) project is in final wrap‐up mode. Dave Goeller will
now be focusing his efforts on farm transition planning full time.
Brad closed his report by asking members to continue to collect the following two needs assessment
questions to post workshop evaluation materials:
1) What is the most crucial risk management need on your farm in the next year?
2) What is the biggest challenge to the success of your operation in the next 5‐10 years?
Farm Bill Education Update:
Gary Schnitkey provided a brief update of the Farm Bill Education proposal that is conditionally funded
by the NCERM Center.
Passage of bill has not yet occurred and he is predicting political resolution by the end of the calendar
year.
Proposed outputs: 1) Farm Bill Fact Sheets, 2) Excel decision aid to choose between commodity title
alternatives, 3) Webinars – implementation of rules to reduce confusion, and 4) Web Q&A session – to
address FAQ arising during sign‐up.
Gary will circulate ideas for a new grant proposal related to crop insurance/leasing/crop budgets.
William Edwards reported that Chad Hart will be taking over Farm Bill training in Iowa.
Administrative Representative Report: Gregg Hadley was introduced to the committee via conference
call. Greg was a farm management specialist at UW River Falls prior to moving to KSU. As the new
Administrative Liaison – Gregg’s major roll is to communicate committee concerns at NC Program
Leader meetings and vice versa. Hadley reported NC Program Leaders are working on a leadership
development program for mid‐tenure specialists. They are looking for help to design the programs.
Program leaders are also developing a program to help coordinate on‐farm research projects across the
region. They are also working on a systematic response to water quality and hypoxia concerns.
They are looking for suggestions on ways to recruit undergraduates and graduate students to careers in
Extension.
The Committee expressed concern about personnel management needs to Gregg. He noted that the
Personnel Management group is still meeting on‐line and there may be other private entity resources
available for future programming if the group wants to look into that as a possibility.
Revision to the bylaws
Dale Nordquist distributed proposed changes
Revised committee organization documents were reviewed and modified slightly. The subcommittee
consisting of Nordquist, Stockton, and Edwards reviewed by‐laws for the committee. Major sections
were revised to be better aligned with current operating procedures. Final revisions will be circulated
and final approval will be set for the spring meeting.
Edwards nominated Kenny Burdine to accept the vacant recording secretary position.
Format and location of future meetings was addressed, including discussion of the merits of one or two
meetings per year. Although no formal motions were used, the consensus of those attending was that
we should continue to meet twice a year. There was support to continue meeting on campuses of
participating states, when possible. The spring meeting would continue to be done much as in the past
(i.e., held on a member campus over two days). The committee discussed the pros and cons of
attaching one of the meetings (likely the fall meeting) to an Ag Finance or Fed meeting (or some other
professional meeting).
State Reports: (See attached PDF)
Michael Langemeier indicated that he and Tim Baker are considering starting a new farm management
journal. This is not intended to replace the Journal of Farm Manager’s and Rural Appraisers but rather
to provide an additional outlet for this type of applied research, given this journal only has one issue per
year.
Triennial Conference Evaluation
Triennial Conference (Overland Park, KS June 2013). There were a few negative comments – too much
time dedicated to tax details. Also concerns about limited Extension participation were expressed. It
was pointed out that NAFBAS meetings typically have more management than was on the agenda this
year. Therefore, this might have been an “outlier” with regard to the scheduling of so much time on tax
issues and isn’t likely to be a major issue going forward. We may want to consider fewer contributed
papers and it was expressed that the length of the conference was too long. Dale Nordquist will prepare
an electronic survey to both attendees and non‐participants. Plans for 2015 conference were tabled
until we have more feedback via the survey. Total attendance was approximately 150 of which 45 were
Extension specialists.
University of Illinois Welcome
Paul Ellinger stopped in to welcome folks to the University of Illinois (he was out of town on first day of
meeting) and he provided a brief update of activities of the Department.
Mykel Taylor – shared Kansas land and rental trends.
She discussed approaches to supplementing NASS data. Kansas is a non‐disclosure state meaning data
are not released publicly, so it is difficult to find information other than that provided by NASS
Kansas market value data lacks seller/buyer information, but does include soil types and irrigation data.
CRP information was also included. They filtered out parcels with less than 40 acres for the analysis and
used NRCS soil productivity ratings measured by AUM.
NASS surveys versus KSU estimates (based on market transactions) of land values – KSU value for non‐
irrigated cropland is 9% higher and the distribution across the state is highly correlated with rainfall.
The Kansas pasture number $1400/acre. Irrigated land values from NASS were $2400 versus $4300/acre
from KSU analysis. A hedonic regression was used – paper to be released soon.
NASS rental rate survey values were compared to KSU estimated market rents (KSU does not conduct a
survey of cash rents like a number of other states do). The NASS survey values represent what people
are paying on average compared to the KSU estimates that are intended to help answer the question of
what is the marginal rental rate?
KSU estimated cash rents are based on 3‐5 year budget estimates using a crop share lease approach,
KAS county yields, and expected cash prices. They found a large difference (+67% on average) between
the KSU‐Lease estimated cash rents and the KAS surveyed values.
Plans for Spring 2014 Committee Meeting
Brad Lubben has offered to host the Spring 2014 meeting in Lincoln. A motion was made to schedule
the spring meeting in mid‐May and hold it in Lincoln, Nebraska. Dates will be announced following
confirmation of logistical details with Lubben.
Meeting adjourned at 11:30 a.m.
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Agricultural Land Values in a Rapidly Changing Market
Mykel Taylorand Kevin Dhuyvetter
Department of Agricultural EconomicsKansas State University
Ag Lenders ConferenceOctober 15‐16, 2013
Garden City and Manhattan, KS
LAND MARKETS
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Land Markets
• Why land?
– Interest rates are LOW and are expected to stay that way for the near‐term
– If you are holding cash…
• Savings rates
– If you want to borrow…
• Lock in a fixed rate at 4‐5%
• Land as an investment
– 3 ‐ 4% cash return on non‐irrigated cropland
– 1 ‐ 2% cash return on pasture
Cash Returns to Non‐Irrigated Land
Source: Kansas Agricultural Statistics (KAS), K‐State
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Cash Returns to Pasture
Source: Kansas Agricultural Statistics (KAS), K‐State
Changing Land Values
• But land appreciates…
– Even if annual cash return is near 0%, you still have an asset that appreciates over time
Price Change (2011-2012)
SourceNon-Irrigated
Cropland Pasture
KC Fed 29.2% 26.0%
KS Ag Stats 25.9% 17.3%
K-State 25.0% 14.8%
Average: 26.7% 19.4%
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KANSAS AG LAND VALUES
Kansas Land Values
• Where do we get information on land values?
• KS Ag Stats Service
– Historical series
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Kansas Land Values
23.6%
22.1%
Source: Kansas Agricultural Statistics (KAS), Kansas Board of Agriculture, United States Department of Agriculture
17.1% annual increase
Kansas Land Values
• Potential problems with these data
– Surveys ask for an opinion (read: guess)
– NOT a market‐based estimate
– Don’t know the spread, only the average
– Funding for KAS is declining
• Can we add to the available information and improve our estimates of land value trends?
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Kansas Land Values
• Land values and rental rates for 2012
– Published in March 2013
• Available at AgManager.info
– Farm Management Leasing section
Kansas Land Values
• Source for market transaction data
– Property Valuation Department, Topeka
• 2010‐12 sales data
– County location
– Size of parcel
– Mixture of irrigated, non‐irrigated and pasture
– Soil types found on parcel
– Well depth, acre‐feet per acre
– Enrollment in government set‐asides
– Value of improvements
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PVD Sales Data
• Data were ‘cleaned’ to remove outliers
– Removed parcels under 40 acres
– Bare land sales only (no houses)
– Arm’s length sales only
• Other aspects of data
– Wyandotte and Johnson counties not in dataset
– Soil type data used to create a productivity measure (AUM capacity)
PVD Sale Data 2010‐12
Average
Parcel Size 229
CRP Acres 1.8%
Sales Per County 56
Total Sales Transactions: 5,782
2012 39.8%
2011 30.9%
2010 29.3%
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PVD Sale Data 2010‐12
Land Type Average $/ac% of All
Transactions
Non‐Irrigated $1,734 55.4%
Irrigated $2,465 5.8%
Native Grass Pasture $1,325 33.5%
Tame Grass Pasture $1,765 5.1%
All Cropland and Pasture $1,638 100%
Results of the Land Model
• 2012 estimate for non‐irrigated cropland
– $2,364/acre
– 39.1% higher than 2012 KAS state estimate of $1,700/acre
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2012 Non‐Irrigated Land Values
$1,842
$1,601
$1,187
$2,549
$2,219
$2,245
$4,200
$3,145
$2,375
Results of the Land Model
• 2012 estimate for pasture
– $1,441/acre
– 51.7% higher than 2012 KAS estimate of $950/acre
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2012 Pasture Land Values
$1,123
$976
$723
$1,553
$1,353
$1,368
$2,559
$1,917
$1,447
Results of the Land Model
• 2012 estimate for irrigated cropland
– $4,302/acre
– 79.3% higher than 2012 KAS estimate of $2,400/acre
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2012 Irrigated Land Values
$4,682
$4,265
$2,685
‐‐
‐‐
$5,576
‐‐
‐‐
‐‐
• Irrigation water available by parcel
2012 Irrigated Land Values
Acre Feet Per Acre
CRDAverage $/ac Average Maximum
No. of Sales
Northwest 4,682 0.73 1.78 38
West Central 4,265 0.82 2.05 27
Southwest 2,685 0.65 2.42 180
South Central 5,576 1.11 3.68 62
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Land Model Results
• Use of a regression model to estimate land values
– Alternative to summary statistics (average, range)
• Allows specification of unique characteristics of land parcels
• Location (rain fall, taxes, proximity to development)
• Productivity (AUM)
• Parcel size
• Mixed use parcels
• When the sale occurs
• CRP enrollment
Land Model Results
• CRP enrollment decreases values
– Approx. a 22.6% discount if acres are enrolled
– We don’t know residual years on contract
• Pasture to non‐irrigated cropland value ratio
– Statewide estimate: 58%
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• Parcel size affects price per acre
– Negative and nonlinear effect
Average Parcel Size
315 ac
359 ac
427 ac
198 ac
187 ac
233 ac
127 ac
183 ac
180 ac
Land Model Results
• Example of this effect in Geary county
– 600 acre parcel of non‐irrigated cropland
• $1,757/acre (tot: $1,054,407)
– 200 acre parcel of non‐irrigated cropland
• $2,031/acre (tot: $406,280)
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• Higher quality ground fetches higher price
– Based on AUM productivity index (NRCS)
Average AUM Rating
0.70
0.66
0.71
0.94
0.97
0.96
1.25
1.43
1.42
Land Model Results
• Selling season effects
– Strongest prices: Oct.‐Dec. (7.0% > summer)
– Weakest prices: Jan.‐Mar. (5.7% < summer)
• Why does this happen?
– Cash on hand after harvest
– Tax benefits (change in capital gains rate)
– KS contract law: give notice 30 days prior to March 1st
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Land Values
• A word of caution when comparing county‐level estimates of value to your land…
• Location and productive capacity are important drivers of price
– Measureable and parcel‐specific
• Model doesn’t capture other factors in market
– Expected returns to agriculture in future
– Excess liquidity in the real estate market
What does the future hold?
Geometric growth rate = 3.5%
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What does the future hold?
Geometric growth rate = 4.0%
What does the future hold?
Potential loss in value = 25%
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KANSAS AG RENTAL RATES
Rental Rates
• Next question…
– How has the land market and returns to crop and livestock production affected rental rates?
• Again, we have only KAS survey data available for the public
– Not an opinion (asks what they actually pay)
– But there is still a lot of variability in rental rates that is masked by KAS averages
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Rental Rates
• Another way to obtain an estimate of cash rental rates for non‐irrigated 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 and apply a risk premium
Rental Rates
• Crop share revenues
– Used predicted crop share %
– KAS county‐level yields
– Expected cash prices
• To obtain a cash rent equivalent…
– Adjust down the expected crop share returns to reflect less risk by the landowner
– Used 15% to reflect high volatility in current commodity markets
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• Predicted crop shares
– Based on a net crop share (no input sharing) and adjusting for landowner receiving no govt pymts.
2014 Non‐Irrigated Rental Rates
Farm ManagementRegion
Predicted Crop Share (%)
West 36.3
North Central 36.2
South Central 30.3
Northeast 37.4
Southeast 29.5
• KAS county‐level yields
– Based on 8‐year average
2014 Non‐Irrigated Rental Rates
Crop
Historic Yields (bu/ac)
Wheat Corn SoybeansGrain
Sorghum
West 27.8 55.2 13.9 53.6
North Central 37.6 89.8 32.3 84.1
South Central 32.3 67.4 23.5 59.4
Northeast 36.5 114.4 37.2 72.7
Southeast 28.7 91.0 26.0 62.3
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• Crop prices based on
– 2014 harvest futures (in Sep) + 3‐yr average basis
2014 Non‐Irrigated Rental Rates
Crop
Expected Prices ($/bu)
Wheat Corn SoybeansGrain
Sorghum
West 6.52 4.79 10.82 4.45
North Central 6.62 4.67 11.08 4.53
South Central 6.69 4.79 11.17 4.59
Northeast 6.52 4.70 11.21 4.35
Southeast 6.59 4.73 11.30 4.42
2014 Non‐Irrigated Rental Rates
CRD2013 KAS
($/ac)KSU-Lease
($/ac)**Difference
(%)
Northwest 46 72 57.6
West Central 38 68 78.7
Southwest 32 60 88.1
North Central 59 102 71.5
Central 46 79 70.7
South Central 43 59 35.4
Northeast 88 147 66.4
East Central 54 105 96.3
Southeast 46 74 59.1**Preliminary estimates
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Rental Rates
• Large differences between KAS survey and KSU‐Lease estimates. Why?
• Surveys reflect many things
– Multi‐year fixed rate leases
– Differences in productivity of land and tenant
– “Relationship” benefits for landowner
• Cash rent estimates use expected prices
– Can and do change as we move forward
– Rents will adjust to reflect these differences
Resources
• 2012 Kansas Land Values and Rental Rates
– By Mykel Taylor and Kevin Dhuyvetter
– http://www.agmanager.info/farmmgt/land/county/CountyValuesRents_Mar_2013.pdf
• Land buying and leasing information and decision‐making tools
– http://www.agmanager.info/farmmgt/land
10/14/2013
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Agricultural Land Values in a Rapidly Changing Market
Mykel TaylorAssistant Professor
Kevin DhuyvetterProfessor