Category Archives: farmland values and rents

In the Bigger Picture….

9 Recommended Agricultural Links ○ ○ ○

Note: Wednesday Editions of “In the Bigger Picture” tend to focus more on general and business information about agriculture.–K.M.

1 . TREND SPOTTING: More and more, institutional investors are owning farmland and its production. Sectors such as almonds, livestock, corn, soybeans, ethanol, and greenhouses are all increasingly owned by institutions. This article is but one of many revealing this trend, and I fully expect this trend to continue.

by Imogen Rose-Smith for Institutional Investor

Today, there are 3 links related to ETHANOL which, as usual, is facing new challenges both in Congress and economically.

2a . ETHANOL EXPORTS: Strategies are being developed to gain ethanol export markets to deal with corn surpluses. $500,000 has been budgeted for export market development in 2015. For example, Peru is being approached because its sugarcane-based ethanol’s low-carbon rating is attracting European buyers, and that spells opportunity for Peru to import ethanol from the U.S. As you can see, this is not an efficiency contest.

By Susanne Retka Schill for Ethanol Producer

2b . 20% TAX BREAK FOR ETHANOL EXPORTERS: U.S. ethanol exports have gone up 47% in four years. It helps that a 20% tax break is available to qualified exporters.

By Donna Funk for Ethanol Producer

2c . 28% CANADIAN CORN TO ETHANOL: Canada is one of the U.S.’s ethanol importers, although it burns 3.25 MT of its own corn [out of 11.5 MT, or 28%] and 1 MT of its wheat [out of 25 MT, or 4%] in its own domestic ethanol production program. (Percentages are according to my own calculations.—KM)

By Erin Voegele for Ethanol Producer

3 . Don’t miss this global NOAA temperature map which shows the remarkable omission of warmer temps in the corn belt region of the U.S. for 2014.

By Michael Roberts for Greed, Green & Grains

Today’s links include 2 on FARMLAND prices and rents.

4a . The annual Iowa farmland survey results are posted here accompanied by two great charts. It concludes that the third golden era of Iowa land prices is ending with an “orderly adjustment”.

By Michael D. Duffy at Iowa State

4b . Farmland rents could fall by one-third.

from Agrimoney

5 . INPUT COSTS/PROFIT MARGINS: This farmer offers first-hand data (in charts) which compares GM versus non-GM corn and soybean profits, as well as her explanation for why their farm discontinued organic corn production.

By Jennie Schmidt for The Foodie Farmer

6 . HUMOR: What is a GMO?

4 Minutes on Youtube

These links were selected by Kay McDonald. For continually updated news about agriculture, please utilize the news feeds on the right sidebar here, and on the “Latest Ag News” tab above.

In the Bigger Picture….

6 Recommended Agricultural Links ○ ○ ○

1 . Have you heard of (!) the Biotech Yield Endorsement? Through it, farmers planting triple-stacked GMO seeds get a 13-20 percent discount on their crop insurance premiums. (Kudos to a Datu Research report, funded by the Walton family.)

By Brain DeVore at the Land Stewardship Project

2 . The “Fresh Thyme Farmers Market” stores are continuing to expand across the Midwest, hoping to have 60 stores by 2019.

By Pamela Riemenschneider for The Packer

3 . This just could be (!) the future: Multiple big equipment marching across big agricultural fields. And, in case you’re wondering why corn silage, think biogas policy in Germany.

8.5 minute Youtube video showing Kemper Machinery (in German)

4 . A coming trend? Poultry consumption is popular, but rife with growing pains from concerned consumers. More choices are becoming available from small operations – producing high quality heritage breeds in healthier environments.

By Matthew Kronsberg for the WSJ

5 . These two Ag Economists told the Wall Street Journal this week how to shave an easy and logical $40 billion off the taxpayers bill for crop-insurance. (paywall)

By Bruce Babcock and Vincent H. Smith, WSJ Opinion

6 . Investors and food insecure nations around the globe have been investing in farmland. This trend could be in its infancy.

from The Economist

Happy New Year Everyone!

These links were selected by Kay McDonald. For continually updated news about agriculture, please utilize the news feeds on the right sidebar here, and on the “Latest Ag News” tab above.

U.S. Farmland Price Change Map 2005 to 2013

source: Rabobank
As this map so clearly demonstrates, the recent run up in farmland prices had a lot to do with ethanol policy which had a sudden upward push on corn prices and a ripple effect on the other commodities. It especially added value to land with “potential” – potential to be plowed (think Dakotas) or irrigated (think Nebraska), maybe even land with the potential for warmer weather due to a changing climate (think Dakotas again), all with a guaranteed profit through crop insurance (and direct payments) financed by your friendly taxpayer. In comparison to the rest of the nation, the Midwest corn belt saw the greatest movement upward in farmland prices since 2005.

With government policies supporting both the production and the income of the corn crop for growers, cropland purchasers over the past seven or eight years have seen the income potential from cropland as a much better bet than zero bound interest rate agreements. And, in an efficiency-driven system that rewards the big for getting bigger, some land owners took their recent year’s farm profits and reinvested them to buy neighboring farmland when available.

As I see it, buying farmland is a very long term hold, so given that policy can change, there are no guarantees that these investments will remain profitable, especially given the complicating issues of changing government regulations and subsidy systems, pollution concerns, water, super weeds, rising input costs, qualified labor, rural demographic issues, and consumers who are revolting against GMO crops and foods. It has always been my opinion that cropland investors, through investment vehicles, are naive about the nature of both farming and investing in farmland – if they are thinking it is a sure bet.

Ernie Goss, in his July report, tells us that the bank CEOs which he interviewed expect land prices to fall by 4.8 percent over the next 12 months, an increase from a rate of decline of 3.2 percent that was expected earlier this year.

This all comes as no surprise, as commodity prices have fallen in price with this season’s bumper crops. Farmland will follow.

Hint: The best future indicator for prices of farmland and commodities themselves can be summed up in two words: Biofuels policies… in the U.S. and everywhere.

Because, in the developed nations, we are still dealing with overproduction, hardly a surefire indicator for buying cropland.

Only from biofuels policies are nations creating new demand to utilize a significant percent of this excess crop production and drive up prices enough to cover their input costs. Through biofuels induced domestic consumption, through the export of biofuels and biofuel related products, and through the tweaking of biofuels policies from year-to-year, perhaps a “swing demander” has emerged for the commodity crops.