1. Land Values History and Overview Murray R. Wise C.E.O. Westchester Group, Inc.

2. Three main forces are supporting farmland values now: 1.Government policies, especially the farm program, encourage rural land ownership 2. America’s back-to-the-country migration stimulates demand for homes, small farms, and “preservation” land 3. Larger farmers see efficiency by expanding acres

3. Inflation Interest rates Government Who are the land buyers? - Competition Landowners’ age FACTORS

4. Land debt Land market outside Iowa Other factors - Income - Landlord’s income - Capitalization rates - Land values vs. U.S. ag exports FACTORS

5. INFLATION In 1980, inflation was 13.5% In 2003, inflation was 2.2%

6. INTEREST RATES In 1980, the U.S. prime interest rate was 21.5% In 2004, the U.S. prime interest rate is 4.0% Long-term farm mortgage rates are 5.5% - 6.2%

7. As you know, bond prices rise when bond rates fall. The long- term interest rate downtrend, and Fed’s current policy of rapid growth in supply of easy-debt dollars, has also tended to lift the values of other “real” assets such as homes and farmland.

8. GOVERNMENT 1970 $236,000,000 1981 $50,000,000 2001$1,970,000,000 Iowa direct payments:

9. As a farmland broker, I want to thank taxpayers for helping support our farmland values! Cropland values in the Corn Belt get 65% of farm program’s land price enhancement

10. WHO’S BUYING? Farmer Investor 1990 2003 81% 60% 16% 34% Source: Professor Mike Duffy, Iowa State University

11. AGE OF IOWA LANDOWNERS 1982 2002 People Over 65 People Over 74 29%48% 12%24% Source: Professor Mike Duffy, Iowa State University

12. IOWA LAND DEBT No Debt 1982 2002 62% 76% Source: Professor Mike Duffy, Iowa State University

13. CONTRACT FOR DEED 1982 18% 2002 4% Source: Professor Mike Duffy, Iowa State University

14. ESTIMATED SOURCES OF TODAY’S FARMLAND BUYING CASH (Billions of dollars expended per year) $2.0 Non-farm financial investors $2.5 Non-farm residential, recreational $1.5 Preservation and conservation $8.0 Farmers and ranchers Expanding farmers and exchanging farmers are 60% of the market Rural home buyers, hunters, all want a “place in the heart” Investors want to own farmland for long-term security In 2000, 300 state and local ballot initiatives raised $8 billion to buy “open space”

15. $ $ $

16. America’s back-to-the-country migration stimulates demand for homes, small farms, and “preservation” land

17. Public “Land preservation” intensifies farmland demand at taxpayer’s expense In 2003, voters approved 64 ballot measures in 16 states to create approximately $1.2 billion in new public money to protect (by purchase or easements) rural land for parks and open space. Source: Trust for Public Land. The Land Trust Alliance warns: “More than eight square miles of agricultural and natural lands are lost to development every day - a total of two million acres every year. At this rate, we have about 20 years to protect our most cherished landscapes before they’re lost forever.”

18. The Nature Conservancy Is the largest single organization controlling land “preservation:” About $3.2 billion in assets, current income of $1 billion -- with intent of raising $1 billion in a special land-buying effort. Acres protected by the Conservancy in the United States by 2004: nearly 15 million Number of Conservancy preserves: about 1,400 Conservancy members: 1 million The Conservancy has doubled its acreage in the U.S. since the mid- 1990s, to 15 million Million Acres

19. Americans are assuming more of a “European” attitude toward farmland ownership: Current rate of return on investment is less important than long-term security of the investment. Farmers are willing to hold farmland for lower rates of annual cash return

20. IMPLIED IOWA CAPITALIZATION RATE 2002 4.7% Source: Professor Mike Duffy, Iowa State University

21. DEKALB COUNTY, ILLINOIS Martin, Goodrich & Waddell, Inc. 1st qtr. 2002 2003 2004 Sales Avg. Value/Acre Over $5,000/Acre Over $6,000/Acre 29 $4,760 20 5 54 $6,626 34 14 7 $6,086 7 4

22. The result of those five-figure per acre sales in DeKalb County in last-half 2003: Average land sale price leaped to $6,939 per acre This includes sales of 4,274 acres totaling almost $30 million in DeKalb County during 2003

23. Excluding government payments Source: USDA

24. As operating efficiency rises and rental competition intensifies, a larger share of net farm income is flowing to farmland Source: USDA

26. Three main forces are supporting farmland values now: 1.Government policies, especially the farm program, encourage rural land ownership 2. America’s back-to-the-country migration stimulates demand for homes, small farms, and “preservation” land 3. Larger farmers see efficiency by expanding acres

27. Larger farmers are seeking efficiency against global competitors like Brazil by renting and buying more acres per farm Just how big will farms get? This competitor in Mato Grosso fields 31 combines, followed by 12 no- till planters for a second crop

28. WHAT COULD CHANGE THE GAME PLAN Government Interest rates - Borrower - Depositor Inflation Commodity prices Alternative investments