1. 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.

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

3. Outline Why study farmland? Recent trends Important drivers

4. 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

5. Average farm real estate values, 1960-2012 Source: USDA, National Agricultural Statistics Service Inflation adjusted using GDP Chain-type deflator, 2005 = 100

6. 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

7. Drivers of farmland values Returns Interest rates

8. Farm real estate and net cash income, 1990 - 2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service

9. Farm real estate and net cash income, 1990 - 2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service

10. Farm real estate and 3-month Treasury Rate, 1990 - 2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, Economic Research Service, St. Louis Federal Reserve

11. Farm real estate and 3-month Treasury Rate, 1990 - 2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, Economic Research Service, St. Louis Federal Reserve

12. Regional differences

13. 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

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

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

16. Urban influence

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

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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. Presenters Todd H. Kuethe tkuethe@ers.usda.gov (202) 694-5593 Jennifer Ifft jifft@ers.usda.gov (202) 694-5552

35. 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