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Profits Weather – Profit – Clouds Hills Community Center
January 26, 2005 Michael Duffy
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Outline Background / Current Situation Land Costs of Production
Profits or Income Questions
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Iowa Farmland 91 percent of land is in farms
68 percent of land is harvested 62 percent of the land and 68 percent of the land in farms are in corn or soybeans 91 percent of the harvested acres are corn or soybeans Iowa farmland valued at approximately $73B
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Estimated Returns to Land
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Capitalization Rate 2002 land taxes $10 land management fee
ISU Extension Estimated Costs of Production, Land Values, and Cash Rents Government payment data from Environmental Working Group
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Land Compared to Dow Jones
Yearly Dow Jones Industrial dividend reported by Dow Jones USDA/Economic Research Service rent values ISU Extension land values Assume $1,000 invested with returns reinvested Land tax is only ownership cost assumed
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Are we setting ourselves up for another fall?
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Different Financial Situation
More land without debt Less land held under contract Different reasons why we are here
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Land Rents and Rental Arrangements
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Costs of Production
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Profits or Income
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Options Get big, survive low margins with volume
Increase efficiency in production/marketing or both Alternative marketing approaches Alternative enterprises Extra income
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Conclusions Considerable uncertainty in the short run
How budget deficit is handled will have an impact of land values and Iowa in general What happens with government farm programs will influence profitability US balance of trade will be important to watch
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Conclusions There are options and alternatives to consider for farmers of all ages Iowa’s land ownership will change considerably over the next few decades Iowa needs to expand its agricultural base Iowa is the primer agricultural state, how we farm says who we are and whether or not Iowa is a desirable place to live
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Thank you! For more information contact me; mduffy@iastate.edu
(515)
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Strategies Decide what you want Inventory what you have
Determine how best to combine what you have to achieve what you want
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Strategies Keep an open mind Be willing to make changes
Maintain diversity Mange crops for highest profits, not yields Manage livestock for lowest cost per pound Marketing Value added products
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Questions to ask Why do I want to farm?
What is agriculture as I envision it? What are the options available to me? What can I learn from my neighbors? What can we do? Never quit asking questions
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