Trends in US Farmland Values and Ownership Todd H. Kuethe and Jennifer Ifft USDA – Economic Research Service NCRCRD Webinar Wednesday October 10, 2012 The views expressed are those of the authors and should not be attributed to ERS or USDA.

Objectives Motivation Major findings of the report Some updates Other ERS research on farmland values

Outline Why study farmland? Recent trends Important drivers

Farm real estate basics “Barometer” of financial health of the agricultural sector Collateral for farm loans Retirement Links to farm policy Price appreciation Source: ERS

Average farm real estate values, Source: USDA, National Agricultural Statistics Service Inflation adjusted using GDP Chain-type deflator, 2005 = 100

Farmland vs. Other Investments Source: USDA, National Agricultural Statistics Service, St. Louis Federal Reserve AAA = Moody’s Seasoned AA Corporate Bond Yield, 10-Year Treasury Constant Maturity

Drivers of farmland values Returns Interest rates

Farm real estate and net cash income, Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service

Farm real estate and net cash income, Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service

Farm real estate and 3-month Treasury Rate, Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, Economic Research Service, St. Louis Federal Reserve

Farm real estate and 3-month Treasury Rate, Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, Economic Research Service, St. Louis Federal Reserve

Regional differences

Average farmland values by land use and region, 2012 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service

Drivers of farmland values Returns Interest rates Non-agricultural drivers?

Rent-to-value ratio Source: USDA, National Agricultural Statistics Service

Urban influence

Share of farmland in urban- influenced areas Source: USDA, National Agricultural Statistics Service

Median cropland values Real estate values are inflation adjusted to 2007 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service

Average Farmland Values Real estate values are inflation adjusted to 2007 by the Consumer Price Index Source: USDA, National Agricultural Statistics Service June Area Survey

1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011 Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland

1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011 Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Urban AreaCropland Market Value / Capitalized Value LowHigh Source: NASS June Area Survey Price-to-Rent Ratio for Cropland 1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011

Presenters Todd H. Kuethe (202) Jennifer Ifft (202)

Suggested readings… Nickerson, C., M. Morehart, T. Kuethe, J. Beckman, J. Ifft, and R. Williams (2012) “Trends in U.S. Farmland Values and Ownership” EIB 92 Economic Research ServiceTrends in U.S. Farmland Values and Ownership Nickerson, C., J. Ifft, T. Kuethe, and M. Morehart (2012) “Farmland Values on the Rise: 2000 – 2010” Amber WavesFarmland Values on the Rise: 2000 – 2010 Kuethe, T.H., J. Ifft, and M. Morehart (2012) “The Influence of Urban Areas on Farmland Values” Choices 26 (2).The Influence of Urban Areas on Farmland Values Ifft, J. and T.H. Kuethe (2011) “Why Are Outside Investors Suddenly Interested in Farmland?” ARE Update 15(1): 9-11.Why Are Outside Investors Suddenly Interested in Farmland