1. Farmland Rental Rate Briefing Ag Lender Day Lamberton August 12 th, 2014 David Bau Extension Educator Agricultural Business Management University of Minnesota Extension bauxx003@umn.edu 507-360-0664 Copyright © 2013. University of Minnesota. All Rights Reserved.

2. 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 © 2013. University of Minnesota. All Rights Reserved.

3. 2014 Corn Budget Copyright © 2013. University of Minnesota. All Rights Reserved.

4. Copyright @ 2012-13 University of Minnesota All Rights Reserved. CORN Budget Southern MN FINBIN Data Maximum Value Minimum Value Actual 2012 Average 03-2012 Project 2013 Actual 2013 Project 2014 Forecas t 2014 Yield per acre (bu.)190.563.62178.05175.43184 180 190178 Operators share of yield %100 Value per bu.6.51.736.53.736.72 4.45 6.955 Total product return per acre1157.23143.381157.23653.981,210.59 749.22 1,263.95890 Miscellaneous income per acre69.66-1.8125.4416.4523.22 110.38 20.9010 Gross return per acre1182.77213.041182.80670.431233.80 859.60 1284.85900

5. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Direct Expenses Maximum Value Minimum Value Actual 2012 Average 03-2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Seed11225.9611272.71116.53 123 121.06121 Fertilizer184.8732.15184.87104.78192.91 188.83 200.95160 Crop chemicals30.6322.1930.6326.0730.97 33.00 31.3131 Crop insurance27.132.9324.8417.1725.99 25.95 27.1528 Drying fuel36.574.285.514.215.36 21.79 5.2115 Fuel & oil36.418.7436.4123.4437.83 36.03 39.2439 Repairs46.8418.2746.8432.2848.24 47.98 49.6450 Custom hire10.993.0910.996.7011.32 9.05 11.6612 Hired labor3.470.151.941.932.04 4.15 2.142 Land rent199.8878.76199.88140.32206.25 246.47 212.63230 Machinery & bldg leases3.250.322.251.962.33 3.37 2.412 Utilities1.20.2200.970.00 1.24 0.001 Marketing4.090.34.091.904.28 3.69 4.485 Operating interest15.146.9910.1910.5210.33 9.83 10.4711 Miscellaneous5.880.964.213.254.38 2.53 4.554 Total direct expenses per acre 674.66216.2674.66457.22698.79 755.44 722.92711 Return over direct exp per acre 508.11-33.01508.11213.22535.02 104.16 561.93189

6. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Overhead Expenses Maximum Value Minimum Value Actual 2012 Average 03-2012 Project 2013 Actual 2013 Projec t 2014 Forecast 2014 Custom Hire 3.041.7402.320.040.072 Hired labor12.944.7412.948.1613.26 12.71 13.5713 Machinery & bldg leases6.451.376.195.296.44 8.26 6.707 Farm insurance8.362.138.365.668.69 9.57 9.029 Utilities5.182.125.043.725.18 5.28 5.336 Dues & professional fees3.40.423.371.933.55 3.75 3.724 Interest8.284.17.477.027.64 7.23 7.808 Mach & bldg depreciation51.6618.0551.6634.4052.62 61.03 53.5754 Miscellaneous9.093.918.956.389.13 9.61 9.3110 Total overhead expenses per acre103.9843.6103.9873.55106.50 117.46 109.02113 Total dir & ovhd expenses per acre 778.63263.91778.63530.77805.28 872.90 831.92824 Net return per acre404.13-81.89404.13139.65428.52 -13.30 452.9176 Lbr & mgt charge per acre58.6724.1858.6740.4960.49 59.78 62.3060 Net return over lbr & mgt345.46-107.64345.46108.47367.92 -73.08 390.3816 Government payments51.95-7.8518.2322.9117.97 18.05 17.710 Net return with gov’t payments363.69-71.72363.69125.49386.13 -55.03 408.5716

7. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Cost of Production Maximum Value Minimum Value Actual 2012 Average 03-2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Total direct expense per bu.$3.79$1.53$3.792.613.81 4.49 3.833.99 Total dir & ovhd exp per bu.$4.37$1.83$4.373.034.38 5.19 4.384.63 With labor & management$4.70$1.83$4.703.124.70 5.55 4.714.97 Total exp less govt & oth income $4.13$1.64$4.132.924.18 4.78 4.224.91 Est. labor hours per acre3.372.42 2.712.582.69 2.89 2.682.6

8. Copyright @ 2012-13 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

9. Copyright @ 2012-13 University of Minnesota All Rights Reserved.

10. 2014 Soybean Budget Copyright © 2013. University of Minnesota. All Rights Reserved.

11. Copyright @ 2012-13 University of Minnesota All Rights Reserved. SOYBEAN Budget Southern MN FINBIN Data Maximum Values Minimum Values Actual 2012 Average 2003-2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Yield per acre (bu.)53.1120.749.2646.7750.7647.0352.2748 Value per bu.13.775.0513.778.8914.17 12.63 14.5811.5 Total product return per acre678.19125.76678.19416.61707.27 594.18 736.34552 Miscellaneous income per acre58.672.1414.9216.3213.23 19.29 11.5415 Gross return per acre693.11172.76693.11432.82720.50 613.47 747.88567

12. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Direct Expenses Maximum Values Minimum Values Actual 2012 Average 2003- 2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Seed56.213.156.237.2058.47 59.99 60.7457 Fertilizer25.291.3425.299.1726.55 23.46 27.8125 Crop chemicals32.9117.3630.6524.7331.16 34.71 31.6631 Crop insurance28.964.8422.3717.4023.29 24.2222 Fuel & oil23.756.7623.1816.9424.00 22.60 24.8224 Repairs30.9914.2130.9923.6031.80 31.11 32.6232 Custom hire7.612.337.614.807.86 6.67 8.108 Hired labor2.360.211.590.891.67 2.84 1.762 Land rent191.5277.86191.52137.72197.50 231.57 203.48230 Machinery & bldg leases2.390.351.541.521.57 2.94 1.612 Marketing1.90.271.461.251.52 2.56 1.592 Operating interest10.85.496.047.556.04 5.73 6.057 Miscellaneous4.720.82.522.462.60 2.35 2.683 Total direct expenses per acre 401.97152.44401.97285.38415.10 451.38 428.24445 Return over direct exp per acre 291.1420.32291.14147.44305.39 162.09 319.65122

13. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Overhead Expenses Maximum Values Minimu m Values Actual 2012 Average 2003-2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Custom hire2.231.401.810.00 0 0 Hired labor7.982.877.985.118.13 7.49 8.288 Machinery & bldg leases51.2553.785.19 4.83 5.395 Farm insurance5.831.815.834.326.04 6.49 6.246 Utilities3.451.543.332.753.40 3.484 Dues & professional fees2.410.162.341.412.46 2.51 2.593 Interest6.423.044.585.094.66 4.53 4.745 Mach & bldg depreciation35.1314.935.1325.4335.64 40.13 36.1635 Miscellaneous6.063.016.064.656.13 6.33 6.206 Total overhead expenses per acre70.2634.5570.2653.8471.67 75.71 73.0772 Total dir & ovhd expenses per acre 472.23195.92472.23339.22486.77 527.09 501.31517 Net return per acre220.88-23.21220.8893.60233.73 86.38 246.5750 Lbr & mgt charge per acre41.1419.7941.1430.7542.05 39.44 42.9645 Net return over lbr & mgt179.74-47.04179.7469.32191.68 46.94 203.615 Government payments42.16017.1821.4018.08 16.94 18.990 Net return with gov’t payments196.92-47.04196.9285.80209.76 63.88 222.605

14. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Cost of Production Maximum Value Minimum Value Actual 2012 Average 03-2012 Project 2013 Actual 2013 Project 2014 Forecast 2014 Total direct expense per bu.8.643.58.166.158.20 9.60 8.249.27 Total dir & ovhd exp per bu.10.284.259.597.319.59 11.21 9.6010.77 With labor & management11.144.6810.427.9710.41 12.04 10.4011.71 Total exp less govt & oth income 9.974.459.777.139.84 11.69 9.9211.40 Est. labor hours per acre2.681.81.801.931.76 1.84 1.712

15. Copyright @ 2012-13 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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17. FINBIN DATA

18. www.finbin.umn.edu

19. Copyright © 2013. University of Minnesota. All Rights Reserved.

21. Increasing Input costs Copyright © 2013. University of Minnesota. All Rights Reserved.

22. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Input costs for corn have been increasing at rate of 14.7% for corn since 2003. Input costs for soybeans have increased at a rate of 10.4% per year since 2003. Input Cost Trends

23. Copyright @ 2012-13 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 $893.09 per acre or $5.02 per bushel at 178 bushels per acre. For 2014 total costs would be $1024.37 per acre or $5.75 per bushel at 178 bushels per acre. Input Cost Trends

24. Copyright @ 2012-13 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 $570.77 per acre or $11.89 per bushel at 48 bushels per acre. For 2014 total costs would be $630.13 per acre or $13.13 per bushel at 48 bushels per acre. Input Cost Trends

25. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Input Cost Trends

26. Copyright @ 2012-13 University of Minnesota All Rights Reserved. SEP 2014351'6-7'6359'4358'6359'4351'2 DEC 2014364'0-7'2371'2370'4371'0363'0 JUL 2015392'2-7'0399'2398'6 391'2 DEC 2015406'6-5'6412'4411'2411'6405'4 DEC 2016420'40 416'0422'0415'2 DEC 2017421'6-5'4427'2424'2 421'6 MonthLastChange Prior Settle OpenHighLow August 8, 2014

27. Copyright @ 2012-13 University of Minnesota All Rights Reserved. MonthLastChange Prior Settle OpenHighLow SEP 20141113'4+14'21099'21097'41114'41097'4 NOV 20141084'6+6'61078'01076'61085'01071'6 JUL 20151112'0 a+5'21106'61105'01113'41101'0 a NOV 2015 1084'0 a +0'41083'41083'01086'61075'2 NOV 20161062'0-3'41065'41067'41068'41060'0 NOV 2017--1056'0--- August 8, 2014

28. Corn Cash Rental Payment After $664 per acre expenses including $70 labor charge ($824-$230 +$70= $664) Copyright © 2011-12. University of Minnesota. All Rights Reserved. Cash Price130145160175190205 $ 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

29. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Minnesota Agricultural Statistic Rental Information

30. Copyright @ 2012-13 University of Minnesota All Rights Reserved. County 2013 2012201120102009 2013 201220112010 Cottonwood 224 204160146137 NA 35 Jackson 222 178155 146 NA 37 NA Lincoln 168 149141132116 48 50 NA43 Lyon 210 174146 132 52.5 NA 30.547.5 Murray 213 205159158137 53 58 34.549.5 Nobles 212 185170148141 NA 50.5 Pipestone 191 156140136137 46 48 4241.5 Redwood 222 184178156144 NA 42NA Rock 226 213182172161 61 51 NA SOUTHWEST 212 183159149139 51.5 49 47 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

31. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Cropland Rental Rates Pasture Rental Rates Irrigated Region 2013 2012201120102009 20132012 20112010 2012 NORTHWEST 98 81.575.56261 16.5 18.5 13.512 121 NORTH CENTRAL NA 23.521.5 14 1213 133 NORTHEAST NA 10.54.5 10 8 58.1NA WEST CENTRAL 160 128 118108100 31.5 28.522.527.5177 CENTRAL 189 164151132119 23 15 15.519 214 EAST CENTRAL 72.5 60 62.5 4644.5 15.5 12 13.5NA SOUTHWEST 212 183159149139 51.5 49 47 NA SOUTH CENTRAL 246 216 181162154 NA 36.549 NA SOUTHEAST 239 192 174160151 36.5 30.53431.5 NA MINNESOTA 177150 135121113283421.524200 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%

32. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Farm Land Rental Rate Trends

33. Copyright @ 2011-12 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 Cottonwood939796101107108143139148164174196205 Jackson101103105109111119146145157167209219229 Lincoln6974858683107120152163167168165172 Lyon808285899294119137140168185218228 Murray8286878994100120143154168237265277 Nobles919397102103117132140146168182207216 Pipestone7874819196105110121136150223219229 Redwood8993929998104122140158173187211220

34. Copyright @ 2011-12 University of Minnesota All Rights Reserved. -------------Average-------------------------------------2013----------------------------2015 2009201020112012AvgMedian 10 th Pctile 90 th Pctile NASS Est. South Central Cottonwood139148164174196 88275224____ Jackson145157167209219220125289222____ Lincoln152n/a 16816516473275168____ Lyon137140168185218206125286210____ Murray14315416823726519897300213____ Nobles140146168182207200129290212____ Pipestonen/a 223219 209100 301191____ Redwood140158173187211200134270222____ Rockn/a 226____ Martin177181210254274258175338274____ Watonwan146165177218265207164317219____

35. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Average Annual Change in Land Rental Rates 2009-2013 2012-2013 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%

36. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Land Values

37. Copyright @ 2011-12 University of Minnesota All Rights Reserved. County20122011201020092008 5 yr ave20122011201020092008 5 yr ave Cottonwood156.7165.7180.4183.0170.0171.243.943.646.547.043.044.8 Jackson177.2164.6185.7184.0172.0176.747.545.048.749.042.546.5 Lincoln143.8148.0161.9163.0148.0152.939.834.444.840.035.038.8 Lyon152.6150.6168.5174.0159.0160.942.034.648.241.037.040.6 Murray150.7168.5186.3183.0170.0171.745.245.550.347.042.546.1 Nobles155.5176.0179.8180.0173.0172.946.645.150.847.541.546.3 Pipestone143.6154.2172.4168.0162.0160.040.538.348.844.038.041.9 Redwood164.1151.0184.0187.0173.0171.845.037.351.345.542.544.3 Rock156.8180.6189.2179.0182.0177.545.548.854.349.547.049.0 Southwest157.3162.5179.7179.0169.0169.544.441.549.446.041.544.6 Minnesota 165.0156.0177.0174.0164.0167.243.038.545.040.038.040.9 Corn and Soybeans County Yields Yields from Minnesota Agricultural Statistic Service Annual Bulletins: 2012, 2011, 2010, 2009. Corn Soybeans

38. Copyright @ 2012-13 University of Minnesota All Rights Reserved. COUNTY 2003200420052006200720082009201020112012 2013 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 2001-2012 Prepared by David Bau, Jim Nesseth 2002-2003 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.

39. Copyright @ 2012-13 University of Minnesota All Rights Reserved. December 2014

40. Copyright @ 2012-13 University of Minnesota All Rights Reserved. November 2014

41. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Forty Year Range in Cash Prices Worthington, Minnesota SOYBEANSCORN Year HighLowDifference YearHighLowDifference 2013 17.7412.205.5420137.454.053.40 2012 17.6511.326.33 20128.225.802.42 2011 13.8710.773.10 20117.495.551.94 2010 13.168.794.37 20105.772.942.83 2009 11.978.233.74 20094.112.781.33 2008 15.507.727.78 20087.002.914.09 2007 11.095.975.12 20074.152.811.34 20066.294.681.61 20063.401.661.74 20057.054.982.07 20051.941.430.51 200410.414.735.68 20043.031.611.42 Average 8.325.632.69 Average3.312.131.19 Prepared by: David Bau – Regional Extension Educator, Agricultural Business Management

42. WORTHINGTON, MN CORN PRICE PROBABILITY A=1988-2012 crop years25 years B=1998-2012 crop years15 years C=2003-2012 crop years10 years D=2008-2012 crop years5 years Corn Percent of Time ABCD $ 7.00471121 $ 6.507111632 $ 6.0010162547 $ 5.5012203054 $ 5.0014233458 $ 4.5016253760 $ 4.0017263962 $ 3.5022335076 $ 3.0030446796 Data collected by Erlin Weness and David Bau and prepared by David Bau.

43. WORTHINGTON, MN SOYBEAN PRICE PROBABILITY ABCD $15.00 2348 $14.00 581223 $13.00 9152340 $12.00 12203050 $11.00 15263862 $10.00 18294469 $9.00 23385789 $8.00 27436599 $7.00354872100 A= 1988-2012 crop year25 years B=1998-2012 crop years15 years C=2003-2012 crop years10 years D=2008-2012 crop years5 years Soybeans Percent of Time Data collected by Erlin Weness and David Bau and prepared by David

44. Copyright @ 2012-13 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 199691.17$329.89$282.2028%32%$2.46$6.84 199794.89$321.49$272.3230%35%$2.37$6.37 199897.04$287.29$254.9334%38%$1.77$5.15 199995.61$269.76$228.6835%42%$1.73$5.10 200098.31$267.31$237.5637%41%$1.75$5.11 200197.89$228.38$208.5243%47%$1.75$5.15 2002101.57$344.09$258.5230%39%$2.18$5.31 2003103.74$358.05$246.8129%42%$2.23$6.85 2004105.90$351.40$228.3030%46%$2.00$5.45 2005110.40$375.47$300.1029%37%$2.03$5.65 2006114.83$511.27$316.0522%36%$2.90$6.05 2007125.44$611.21$472.7621%27%$3.68$9.52 2008146.55$681.06$432.3222%34%$3.89$9.65 2009158.86$716.55$474.3222%33%$3.74$9.66 2010168.25$884.41$564.0219%30%$4.68$10.87 2011169.32$929.62$493.0418%34%$5.66$11.40 2012199.88$1,182.80$693.1117%29%$6.50$13.77 2013243.47$802.56$593.9930%41%$4.4512.63 Average27.56%36.83%

45. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Calendar Year CornSoybeans 2013$6.04$13.99 2012$6.83$12.64 2011$6.62$12.83 2010$3.84$10.01 2009$3.40$9.89 2008$4.92$11.59 2007$3.38$7.78 2006$2.15$5.39 2005$1.68$5.80 2004$2.32$7.53 10 YR Average$4.12$9.75 Worthington Yearly Average Cash Prices

46. Copyright @ 2012-13 University of Minnesota All Rights Reserved. Questions?? http://www.extension.umn.edu/agriculture/business/ 2014 Farm Resource Guide David Bau Regional Extension Educator Agricultural Business Management University of Minnesota Extension bauxx003@umn.edu