Farmland Rental Rate Briefing Ag Lender Day Lamberton August 12 th, 2014 David Bau Extension Educator Agricultural Business Management University of Minnesota Extension Copyright © University of Minnesota. All Rights Reserved.

TODAY’S AGENDA: Corn and Soybeans 2014 Outlook FINBIN DATA Increasing Input costs Minnesota Agricultural Statistic Information Farm Land Rental Rate Trends Land Values Current Local Markets Copyright © University of Minnesota. All Rights Reserved.

2014 Corn Budget Copyright © University of Minnesota. All Rights Reserved.

University of Minnesota All Rights Reserved. CORN Budget Southern MN FINBIN Data Maximum Value Minimum Value Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecas t 2014 Yield per acre (bu.) Operators share of yield %100 Value per bu Total product return per acre , , Miscellaneous income per acre Gross return per acre

University of Minnesota All Rights Reserved. Direct Expenses Maximum Value Minimum Value Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Seed Fertilizer Crop chemicals Crop insurance Drying fuel Fuel & oil Repairs Custom hire Hired labor Land rent Machinery & bldg leases Utilities Marketing Operating interest Miscellaneous Total direct expenses per acre Return over direct exp per acre

University of Minnesota All Rights Reserved. Overhead Expenses Maximum Value Minimum Value Actual 2012 Average Project 2013 Actual 2013 Projec t 2014 Forecast 2014 Custom Hire Hired labor Machinery & bldg leases Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre Net return per acre Lbr & mgt charge per acre Net return over lbr & mgt Government payments Net return with gov’t payments

University of Minnesota All Rights Reserved. Cost of Production Maximum Value Minimum Value Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Total direct expense per bu.$3.79$1.53$ Total dir & ovhd exp per bu.$4.37$1.83$ With labor & management$4.70$1.83$ Total exp less govt & oth income $4.13$1.64$ Est. labor hours per acre

University of Minnesota All Rights Reserved. Rents at $230 in forecast example Farmer Keeps: $60 labor charge and $16 net income $76 Total With 178 bushels of corn at $5.00 per bushel

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2014 Soybean Budget Copyright © University of Minnesota. All Rights Reserved.

University of Minnesota All Rights Reserved. SOYBEAN Budget Southern MN FINBIN Data Maximum Values Minimum Values Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Yield per acre (bu.) Value per bu Total product return per acre Miscellaneous income per acre Gross return per acre

University of Minnesota All Rights Reserved. Direct Expenses Maximum Values Minimum Values Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Seed Fertilizer Crop chemicals Crop insurance Fuel & oil Repairs Custom hire Hired labor Land rent Machinery & bldg leases Marketing Operating interest Miscellaneous Total direct expenses per acre Return over direct exp per acre

University of Minnesota All Rights Reserved. Overhead Expenses Maximum Values Minimu m Values Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Custom hire Hired labor Machinery & bldg leases Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre Net return per acre Lbr & mgt charge per acre Net return over lbr & mgt Government payments Net return with gov’t payments

University of Minnesota All Rights Reserved. Cost of Production Maximum Value Minimum Value Actual 2012 Average Project 2013 Actual 2013 Project 2014 Forecast 2014 Total direct expense per bu Total dir & ovhd exp per bu With labor & management Total exp less govt & oth income Est. labor hours per acre

University of Minnesota All Rights Reserved. Rents at $230 in forecast example Farmer Keeps: $45 labor charge and $5 net income $50 Total With 48 bushels soybeans at $11.50 per bushel

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FINBIN DATA

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Increasing Input costs Copyright © University of Minnesota. All Rights Reserved.

University of Minnesota All Rights Reserved. Input costs for corn have been increasing at rate of 14.7% for corn since Input costs for soybeans have increased at a rate of 10.4% per year since Input Cost Trends

University of Minnesota All Rights Reserved. If you would apply the 14.7% increase per year to 2012 numbers that would make 2013 total corn input cost direct and overhead expense at $ per acre or $5.02 per bushel at 178 bushels per acre. For 2014 total costs would be $ per acre or $5.75 per bushel at 178 bushels per acre. Input Cost Trends

University of Minnesota All Rights Reserved. If you would apply the 10.4% increase per year to 2012 numbers that would make 2013 total soybean input cost direct and overhead expense at $ per acre or $11.89 per bushel at 48 bushels per acre. For 2014 total costs would be $ per acre or $13.13 per bushel at 48 bushels per acre. Input Cost Trends

University of Minnesota All Rights Reserved. Input Cost Trends

University of Minnesota All Rights Reserved. SEP '6-7'6359'4358'6359'4351'2 DEC '0-7'2371'2370'4371'0363'0 JUL '2-7'0399'2398'6 391'2 DEC '6-5'6412'4411'2411'6405'4 DEC '40 416'0422'0415'2 DEC '6-5'4427'2424'2 421'6 MonthLastChange Prior Settle OpenHighLow August 8, 2014

University of Minnesota All Rights Reserved. MonthLastChange Prior Settle OpenHighLow SEP '4+14'21099'21097'41114'41097'4 NOV '6+6'61078'01076'61085'01071'6 JUL '0 a+5'21106'61105'01113'41101'0 a NOV '0 a +0'41083'41083'01086'61075'2 NOV '0-3'41065'41067'41068'41060'0 NOV '0--- August 8, 2014

Corn Cash Rental Payment After $664 per acre expenses including $70 labor charge ($824-$230 +$70= $664) Copyright © University of Minnesota. All Rights Reserved. Cash Price $ 3.50$-209$-157$-104$-52$1$54 $ 4.00$-144$-84$-24$36$96$156 $ 4.50$-79$-12$56$124$191$259 $ 5.00$-14$61$136$211$286$361 $ 5.50$51$134$216$299$381$464 $ 6.00$116$206$296$386$476$566 $ 6.50$181$279$376$474$571$669 $ 7.00$246$351$456$561$666$771 Yield Per Acre

University of Minnesota All Rights Reserved. Minnesota Agricultural Statistic Rental Information

University of Minnesota All Rights Reserved. County Cottonwood NA 35 Jackson NA 37 NA Lincoln NA43 Lyon NA Murray Nobles NA 50.5 Pipestone Redwood NA 42NA Rock NA SOUTHWEST Cropland Rental Rates Pasture Rental Rates Minnesota Cropland and Pasture Rental Rates Data provided by the Minnesota Agricultural Statistic Service September 2012, 2011 and 2010 and May 2009 NASS.USDA.GOV

University of Minnesota All Rights Reserved. Cropland Rental Rates Pasture Rental Rates Irrigated Region NORTHWEST NORTH CENTRAL NA NORTHEAST NA NA WEST CENTRAL CENTRAL EAST CENTRAL NA SOUTHWEST NA SOUTH CENTRAL NA NA SOUTHEAST NA MINNESOTA Minnesota Cropland and Pasture Rental Rates Data provided by the Minnesota Agricultural Statistic Service September 2011 and 2010 and May 2009 **Minnesota average cropland rent in 2014 $185 increased 4.5% Down from 18% previous year and 11.1% increase in 2012 Pasture average in 2014 $26 declined 7%

University of Minnesota All Rights Reserved. Farm Land Rental Rate Trends

University of Minnesota All Rights Reserved. Average Rents Paid Per Acre County'02'03'04'05'06'07'08 ' 09 ‘10‘11'12 '13 Est. '14 Average Cropland Rental Rates paid in Adult Farm Management FINBIN database. Calculated 2014 based on FINBIN rents increased 4.5 percent from 2013 to 2013 multiplied by 2013 rates to estimate to determine 2014 rental rates Southwest Cottonwood Jackson Lincoln Lyon Murray Nobles Pipestone Redwood

University of Minnesota All Rights Reserved Average AvgMedian 10 th Pctile 90 th Pctile NASS Est. South Central Cottonwood ____ Jackson ____ Lincoln152n/a ____ Lyon ____ Murray ____ Nobles ____ Pipestonen/a ____ Redwood ____ Rockn/a 226____ Martin ____ Watonwan ____

University of Minnesota All Rights Reserved. Average Annual Change in Land Rental Rates Northwest 9.6%11.2% West Central n/a Central 11.6%12.2% East Central 4.5%15.0% Southwest 11.8%10.2% South Central 12.1%10.7% Southeast 10.9%4.4% State 11.6%11.3%

University of Minnesota All Rights Reserved. Land Values

University of Minnesota All Rights Reserved. County yr ave yr ave Cottonwood Jackson Lincoln Lyon Murray Nobles Pipestone Redwood Rock Southwest Minnesota Corn and Soybeans County Yields Yields from Minnesota Agricultural Statistic Service Annual Bulletins: 2012, 2011, 2010, Corn Soybeans

University of Minnesota All Rights Reserved. COUNTY CHIPPEWA NA $2481$2582$2615$3776$3,932$3,605$3,892$6,024 $7,288 COTTONWOOD $1625$1854$2439$2853$3005$4423$2,798$3,699$5,424$7,807 $9,300 JACKSON $1790$2111$2671$2969$3332$4425$3,999$4,100$6,453$5,981 $7,665 LAC QUI PARLE $1220$1461$1742$1933$2217$2474$3,138$3,326$4,052$4,174 $5,797 LINCOLN $1223$1172$1509$1624$2401$2343$2,917$2,830$3,464$4,253 $7,501 LYON $1676$1878$2012$2303$2207$3912$2,908$3,373$5,057$6,284 $8,687 MARTIN $2091$2476$2871$3092$3478$3783$4,446$4,634$4,509$8,359 $9,401 MURRAY $1672$2039$2183$2286$2500$3523$3,700$3,919$3,859$5,678 $8,452 NOBLES $1928$2238$2411$2882$3393$4126$3,939$5,037$4,850$6,109 $8,602 PIPESTONE $1334$1851$1880$2127$2409$3386$3,680$3,511$4,433$5,615 $9,400 REDWOOD NA $2705$2743$2880$3759$4,158$4,259$5,445$7,479 $8,263 ROCK $1926$2139$2369$2992$3912$5052$5,221$4,783 No Sales $7,839 $11,074 WATONWAN $1842$2193$2337$3112$3103$3642$4,000$4,107$4,983$6,349 $8,964 YELLOW MED. NA $2055$2537$2429$3203$3,425$3,595$4,515$5,481 $8,125 AVERAGE $1666$1947$2262$2574 $2849$3702 $3,733$3,913$4,687 $6,245 $8,466 SW MINNESOTA COUNTY FARM LAND PRICES Prepared by David Bau, Jim Nesseth The amounts listed below are the prices paid per acre for total farmland (not tillable acres) in each listed county. The data is from farm sales recorded from January 1 st through June 30 th of the respective years. The data includes only bare land sales. No land and building combination sales are included. The information is from actual arms length sales reported to county authorities and collected by personnel of the University of Minnesota Extension. Sales data was not weighted for acres, each sale on a per acre basis was averaged to get the average price paid per acre. In 2005 added counties Chippewa, Lac qui Parle, Redwood and Yellow Medicine to study.

University of Minnesota All Rights Reserved. December 2014

University of Minnesota All Rights Reserved. November 2014

University of Minnesota All Rights Reserved. Forty Year Range in Cash Prices Worthington, Minnesota SOYBEANSCORN Year HighLowDifference YearHighLowDifference Average Average Prepared by: David Bau – Regional Extension Educator, Agricultural Business Management

WORTHINGTON, MN CORN PRICE PROBABILITY A= crop years25 years B= crop years15 years C= crop years10 years D= crop years5 years Corn Percent of Time ABCD $ $ $ $ $ $ $ $ $ Data collected by Erlin Weness and David Bau and prepared by David Bau.

WORTHINGTON, MN SOYBEAN PRICE PROBABILITY ABCD $ $ $ $ $ $ $ $ $ A= crop year25 years B= crop years15 years C= crop years10 years D= crop years5 years Soybeans Percent of Time Data collected by Erlin Weness and David Bau and prepared by David

University of Minnesota All Rights Reserved. Table 1. Average Southern Minnesota Cash Rent as a Percentage of Gross Revenue Average Cash Rent Paid Per Acre Average Gross Revenue, Dollars per Acre Average Cash Rent as % of Gross Revenue Corn Price Soybean Price YearSouthern MNCornSoybeansCornSoybeans $329.89$ %32%$2.46$ $321.49$ %35%$2.37$ $287.29$ %38%$1.77$ $269.76$ %42%$1.73$ $267.31$ %41%$1.75$ $228.38$ %47%$1.75$ $344.09$ %39%$2.18$ $358.05$ %42%$2.23$ $351.40$ %46%$2.00$ $375.47$ %37%$2.03$ $511.27$ %36%$2.90$ $611.21$ %27%$3.68$ $681.06$ %34%$3.89$ $716.55$ %33%$3.74$ $884.41$ %30%$4.68$ $929.62$ %34%$5.66$ $1,182.80$ %29%$6.50$ $802.56$ %41%$ Average27.56%36.83%

University of Minnesota All Rights Reserved. Calendar Year CornSoybeans 2013$6.04$ $6.83$ $6.62$ $3.84$ $3.40$ $4.92$ $3.38$ $2.15$ $1.68$ $2.32$ YR Average$4.12$9.75 Worthington Yearly Average Cash Prices

University of Minnesota All Rights Reserved. Questions?? Farm Resource Guide David Bau Regional Extension Educator Agricultural Business Management University of Minnesota Extension