1. BioFuels Impacts Today/Tomorrow Land, Rents, Farm Management Midwest, Great Plains and Western Outlook Conference Indianapolis, IN Mike Duffy August 15, 2007

2. Outline Land values and rents Current situation Observation Outlook Discussion

3. Land Values

21. Current Situation

22. Sub prime mortgage situation and responses Increased production costs, especially seed and fertilizer Increased fertilizer use with more corn Considerable interest in 2008 rents in Iowa Two camps; 10% or 25% increase Changing rent structure and owner demographics

26. Observation

27. Another Golden Era? “There never has been a more glorious opportunity in the history of the world for the Corn Belt farmer than there is today…” “It (Tama County land) will never be worth any less and the tendency will be for higher prices from now on,..” 1919 Tama County survey

28. Another Golden Era? “The 1970’s have sometimes been called the second golden age of American agriculture, comparable in many ways to the period from 1905 to 1915,…” the first golden age. “..many agricultural economists, and others urged farmers to expand their operations so the United States would be able to meet the demands for its farm products.”

30. Another Golden Era? Is the bioeconomy the final push to move agriculture beyond “the curse of agricultural abundance”? Some factors are different but some factors remain the same Farmers always have a tendency to bid profits into land values; other costs of production, especially energy based costs are increasing

31. Outlook

32. Factors to Watch The bioeconomy, especially corn based ethanol The government programs; 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. 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

34. 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; tempered by overall economy How long will this ‘golden era’ last and what will be the aftermath?

35. Discussion