1. Outlook for the Land Market
American Bankers Association
Agricultural Lenders Conference
Las Vegas, NV
November 14, 2006
Michael Duffy

2. Outline
Current situation
Ethanol
Observations
Discussions

8. Farm Interest Rates, Chicago Federal Reserve District
Interest rates charged on new farm loans in the Seventh District
                                                                                                                                             

9. Minnesota Federal Reserve Board

11. Recent Estimates
Chicago Fed reported a 1% increase in the 2nd quarter and a 9% increase July to July for the 7th District
Iowa Chapter of Realtors Land Institute reported a 2.9% increase from March to September. Approximately 5.3% increase Sept. to Sept.
ISU Soil Management Conference participants estimated a 7.8% increase from Nov. to Nov.
Ethanol demand is starting to be felt

12. Bioeconomy and Ethanol

13. Goal of the Bioeconomy
The bioeconomy is nothing less than a revolution in the way society will obtain vital sources of carbon and energy for growth and well being, in the process sweeping away the petroleum economy.  Agriculture will make this transformation possible.
Robert Brown, Director, ISU, Biorenewable Programs

15. U.S. Energy Consumption by Sector

16. Ethanol Related Facts
Americans use approximately 382 million gallons of gas a day (1.3 gal/capita)
U.S. imports approximately 65% of the crude oil it uses
Conversion of corn to ethanol is approximately 2.6 gallons per bushel

18. Iowa corn processing & ethanol plants, current & planned, 10/26/0663
Iowa corn processing & ethanol plants, current & planned, 10/26/06

19. Figure 2.
8/30/06

29. Questions
What price ratios will it take to slow the planned expansion in ethanol production?
How long will it take before substitutes are developed?
What form will the substitutes take and will they use the same land and infrastructure?
Will ethanol be an additive or a fuel?

30. Ethanol Factors Can we get to 20M acres of corn in Iowa
Do we have the storage capacity
Do we have the infrastructure to handle the fertilizer use
Do we have the ability to transport
What will happen to the export and/or livestock sectors
Environmental impact and reaction

32. Factors to Watch The bioeconomy, especially corn based ethanol
The government programs, new farm bill will be debated in the coming year; outcome for level and type of programs is unknown; more of the same but less of it; major cuts? Regional differences could be a major factor; Public sentiment

33. Government Payments/NFI 2000 - 2004
Source:USDA/ERS

34. Factors to Watch
Overall performance of the economy, especially interest rates
Recreational demand
Performance of the housing market
Aging farmland owners and what the second generation will do with the land

35. Factors to Watch
We are entering into a period of major uncertainty. How the ethanol situation will play out no one knows for sure.
Land values will move with higher income and anticipation
Are we setting ourselves up for another fall or is this a new plateau?

36. Discussion

37. THANK YOU