Category Archives: rental rates

New Farmland Price Updates From the Midwest — First Quarter 2012

1. From the Federal Reserve Bank of Kansas City 1st Quarter 2012 — Report By Jason Henderson and Maria Akers. 
(This district includes the northern portions of Illinois and Indiana, southern Wisconsin, the Lower Peninsula of Michigan, and the state of Iowa.)

I have chosen some key points from this report in the bullets below:

  • First-quarter ranchland values climbed higher, jumping 16 percent above year-ago levels.
  • For the first time since the survey began in the late 1970s, the annual value of District cropland rose more than 20 percent for two consecutive years.
  • Farm credit conditions strengthened further in the first quarter while demand for farm loans dwindled.
  • Several bankers noted some farmers were converting pasture ground to row crops when feasible.
  • The index of farm loan demand fell to its lowest level since the late 1980s.


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  • Compared with the fourth quarter of 2011, the value of nonirrigated and irrigated cropland in the District surged by 8 and 9 percent, respectively.
  • Ranchland values also shot up in the first quarter, appreciating more than 7 percent since the end of last year.
  • The value of nonirrigated cropland rose 25 percent above year ago levels in the first quarter of 2012, on top of the more than 20 percent gain posted in 2011.
  • The value of irrigated acreage vaulted more than 30 percent higher than a year ago, a new survey high.
  • Nebraska once again led farmland value gains for the District, followed by Kansas.

Selected quotes from the districts area bankers:

“There is more liquidity in the farm sector than I have seen in my 30 years as a banker.” —Northeast Kansa

“Land prices are higher and more buyers are out-of-town investors.” —Southeast Wyoming

“Pasture that could potentially be tilled is bringing significantly higher prices.” —Southeast Nebraska

 

2. From the Federal Reserve Bank of Chicago 1st Quarter 2012 Report on Farmland and Credit Conditions in the 7th District — by David B. Oppedahl 
(This district includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico.)
To follow are the highlights that I’ve selected from the Chicago report:

  • There was a 19 percent year-over-year increase in the first quarter of 2012.
  • The quarterly increase in agricultural land values for the District was 5 percent—in line with the gains of the past year and a half.
  • The demand to purchase farmland in the six months ending with March 2012 was higher relative to that in the six months ending with March 2011. Additionally, the number of farms sold, acreage sold, and the amount of farmland for sale over the winter and early spring rose more sharply than a year ago.
  • Farmland values in Iowa continued to lead the pack, with a year-over-year increase of 27 percent.
  • On a year-over-year basis, “good” agricultural land values in Illinois, Indiana, Michigan, and Wisconsin were up 20 percent, 15 percent, 7 percent, and 13 percent, respectively.
  • Relative to investors, farmers again purchased a higher share of the acres sold in the past three to six months, although investors were actively searching for properties across the District.
  • Farmland cash rental rates in 2012 climbed 17 percent from 2011 for the District—the second-largest increase in the history of the survey. Cash rental rates for agricultural land went up 15 percent in Illinois, 15 percent in Indiana, 20 percent in Iowa, 12 percent in Michigan, and 19 percent in Wisconsin
  • Based on the USDA index of prices paid by farmers, input costs for agriculture rose 6.6 percent through the first quarter of 2012 compared with the first quarter of 2011. Thus, with possibly lower revenues for several outputs and higher costs for inputs, agriculture faces a more challenging road to profits in 2012 than in 2011.
  • The index of non-real-estate agricultural loan repayment rates climbed to its highest level in the survey’s history (154) for the first quarter of 2012, as 56 percent of the respondents noted higher rates of repayment and only 2 percent noted lower rates.
  • Growth was forecasted in farm machinery, grain storage construction, and real estate loan volumes in the second quarter of 2012 compared with the second quarter of 2011.

In both districts, there was some momentum to sell to take advantage of current high farmland prices, with more properties on the market.

The last part that I thought was interesting was this data on machinery sales. Combines and the largest of tractor sales is down, presumably because some purchases were already made in the early part of this boom.

 

Hot 5: China’s Dairy. Rodale Study. MIT Battery. Farmland Rents Return. Biodynamic Farming.

1. China is Industrializing its Dairy

China is in the process of importing 100,000 dairy cows from Australia, New Zealand and Uruguay for the company Modern Dairy which is funded by the U.S. company KKR and other private investors. Existing dairy cows in China are half as productive as those in the U.S. and the nation would like to become self-sufficient in dairy. Consumption of dairy products is rising along with the level of affluence in China’s population.


2. Rodale Study Shows that Organic Farming of Corn Outperforms Conventional In Drought Years

The above photo is from the Rodale Institute Study “Organic Farming Outperforms Conventional, Chemical Farming Based on a 30-year side-by-side trial”. It shows corn in the legume-based (left) and conventional (right) plots six weeks after planting during the 1995 drought. The conventional corn is showing signs of water stress.

Organic corn yields were 31% higher than conventional in years of drought. These drought yields are remarkable when compared to genetically engineered “drought tolerant” varieties which saw increases of only 6.7% to 13.3% over conventional (non-drought resistant) varietiies.

Also, corn and soybean crops in the organic systems tolerated much higher levels of weed competition than their conventional counterparts, while producing equivalent yields. This is especially significant given the rise of herbicide-resistant weeds in conventional systems, and speaks to the increased health and productivity of the organic soil (supporting both weeds and crop yields).

To review the Rodale study, go here.

3. MIT Professor Donald Sadoway Has Developed a Cheap Scaleable Battery Which Can Power 200 Homes With One Battery the Size of a Shipping Container

Battery technology advancement is critical for green energy and for farming in remote areas. As climate change increases the cost of storm damage to the electrical grid, less populated areas may become vulnerable to repair neglect, just as cell phone services are dropping calls in some rural areas. Micro-grids are proving cost-competitive for farmers in developing nations of India and Africa as I reported in news here earlier this week.

The problem at the heart of many sustainable-energy systems: How to store power so it can be delivered to the grid all the time, day and night, even when the wind’s not blowing and the sun’s not shining? At MIT, Donald Sadoway has been working on a grid-size battery system that stores energy using a three-layer liquid-metal core, based on floating layers of high-temperature molten metal and salt. He says that what has been a handicap for other types of batteries — namely, that they tend to get very hot during either charging or discharging — is actually a big plus for his liquid version.

With help from fans like Bill Gates, Sadoway and two of his students have spun off the Liquid Metals Battery Corporation (LMBC) to bring the battery to market. The company has received $13 million in government and industry funding.

“With a giant battery, we’d be able to address the problem of intermittency that prevents wind and solar from contributing to the grid in the same way that coal and gas and nuclear do today.”

Sadoway was named by TIME magazine as one of the 100 most influential people of 2012.

4. Farmland Return on Investment Continues to Decline According to Rent-To-Value Ratio

The farmland rent-to-value (RTV) ratio, calculated as the cash rent per acre divided by the land value per acre, is a proxy for how quickly an asset will pay for itself. The roughly 45-year trend reveals a decreasing RTV ratio. If agricultural rents were the sole source of returns from farmland, the farmland would have paid for itself in about 14 years in 1951, but would take more than 33 years in 2007. The regions with the highest RTV ratios are the Northern Plains, Delta, Mountain, and Pacific regions. Since 1999, almost every USDA region has seen a decrease in RTV ratios. Farmland prices are more volatile than rents.

5. What is Biodynamic Farming?

The Biodynamic Farming concept originated with Austrian Rudolph Steiner in the 1920s, who also started the Waldorf School education system. In farmers markets everywhere, I am seeing organic farms tout that they practice “biodynamic farming”.

Biodynamic farming:

  • Is holistic organic farming.
  • Works with the rhythms of nature.
  • Is self-sustaining.
  • Works under a theory of cosmic influences.
  • An astronomical sowing and planting calendar is used.
  • Unifies the relationship between soil, plants, and animals.
  • It requires many years to build healthy soil using manures and composts.
  • Healthy soil in return produces healthier, higher quality food.
  • It requires a diversified farm.
  • It works economically when producers and consumers fulfill each others needs. A good example is Community Supported Agriculture, or the CSA, which was developed by biodynamic farmers.


As an aside, note that one unsustainable aspect of modern organic farming that you may have noticed in the above video and on organic farms that you’ve visited, is the large amount of plastic used (and later discarded) for weed-blocking and greenhouses. Plastic is very important to organic farmers to save weeding labor, help with the soil’s moisture retention, and extend the season for produce.

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