trends in us farmland values and ownership todd h. kuethe and jennifer ifft usda – economic...
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Trends in US Farmland Values and Ownership
Todd H. Kuethe and Jennifer IfftUSDA – Economic Research Service
NCRCRD WebinarWednesday October 10, 2012
The views expressed are those of the authors and should not be attributed to ERS or USDA.
Objectives
• Motivation• Major findings of the
report• Some updates• Other ERS research on
farmland values
Outline
• Why study farmland?• Recent trends• Important drivers
Farm real estate basics
• “Barometer” of financial health of the agricultural sector
• Collateral for farm loans• Retirement• Links to farm policy• Price appreciation
2008 2009 2010 2011 2012F
84.283.9
84.6
85.3
86.0
Share of total farm assets (%)
Source: ERS
Average farm real estate values, 1960-2012
Source: USDA, National Agricultural Statistics ServiceInflation adjusted using GDP Chain-type deflator, 2005 = 100
19601962
19641966
19681970
19721974
19761978
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20120
500
1,000
1,500
2,000
2,500
Nominal
Inflation ad-justed
Dolla
rs p
er A
cre
Farmland vs. Other Investments
Source: USDA, National Agricultural Statistics Service, St. Louis Federal ReserveAAA = Moody’s Seasoned AA Corporate Bond Yield, 10-Year Treasury Constant Maturity
0 2 4 6 8 10 12 14 16 18 200
2
4
6
8
10
AAA
TreasuryFarmland
Dow JonesS&P 500
1970 - 2011
Standard Deviation Return (%)
Mea
n Re
turn
(%)
0 5 10 15 200
2
4
6
8
10
AAA
Treasury
Farmland
Dow Jones
S&P 500
2000 - 2011
Standard Deviation Return (%)
Mea
n Re
turn
(%)
Drivers of farmland values
• Returns• Interest rates
Farm real estate and net cash income, 1990 - 2011
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0
500
1,000
1,500
2,000
2,500
0
20
40
60
80
100
120
140
Real Estate
Net Cash Income
$/A
cre
(200
5)
$/A
cre
(200
5)
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflatorSource: USDA, National Agricultural Statistics Service, Economic Research Service
Farm real estate and net cash income, 1990 - 2011
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0
500
1,000
1,500
2,000
2,500
0
20
40
60
80
100
120
140
Real EstateLinear (Real Estate)Net Cash Income
$/A
cre
(200
5)
$/A
cre
(200
5)
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflatorSource: USDA, National Agricultural Statistics Service, Economic Research Service
Farm real estate and 3-month Treasury Rate, 1990 - 2011
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0
500
1,000
1,500
2,000
2,500
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00Real Estate
Interest Rate
$/A
cre
(200
5)
Perc
ent
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflatorSource: USDA, Economic Research Service, St. Louis Federal Reserve
Farm real estate and 3-month Treasury Rate, 1990 - 2011
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0
500
1,000
1,500
2,000
2,500
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00Real EstateLinear (Real Estate)Interest Rate
$/A
cre
(200
5)
Perc
ent
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflatorSource: USDA, Economic Research Service, St. Louis Federal Reserve
Regional differences
Average farmland values by land use and region, 2012
Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflatorSource: USDA, National Agricultural Statistics Service
Northeast
Lake
Corn Belt
Northern
Plains
Appalachian
SoutheastDelta
Southern Plains
MountainPacifi
cUSA
0
1,000
2,000
3,000
4,000
5,000
6,000
Cropland
Pastureland
$/A
cre
(200
5)
Drivers of farmland values
• Returns• Interest rates• Non-agricultural drivers?
Rent-to-value ratio
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0
0.5
1.0
1.5
2.0
Cropland
Pastureland
Source: USDA, National Agricultural Statistics Service
Urban influence
Share of farmland in urban-influenced areas
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0
5.0
10.0
15.0
20.0
Perc
ent
Source: USDA, National Agricultural Statistics Service
Median cropland values
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
1,000
2,000
3,000
4,000
5,000
Urban-influenced
Rural
$/A
cre
(200
7)
Real estate values are inflation adjusted to 2007 by the GDP Chain-type deflatorSource: USDA, National Agricultural Statistics Service
Average Farmland Values
Real estate values are inflation adjusted to 2007 by the Consumer Price IndexSource: USDA, National Agricultural Statistics Service June Area Survey
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
2,000
4,000
6,000
8,000
10,000Urban CroplandUrban PastureRural CroplandRural Pasture
$/A
cre
(200
7)
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Urban AreaCropland Market Value / Capitalized Value
Low High
Source: NASS June Area Survey
Price-to-Rent Ratio for Cropland
1999 – 2000 – 2001 – 2002 – 2003 – 2004 – 2005 – 2006 – 2007 – 2008 – 2009 – 2010 – 2011
Presenters
Todd H. Kuethe• tkuethe@ers.usda.gov• (202) 694-5593
Jennifer Ifft• jifft@ers.usda.gov• (202) 694-5552
Suggested readings…
• Nickerson, C., M. Morehart, T. Kuethe, J. Beckman, J. Ifft, and R. Williams (2012) “Trends in U.S. Farmland Values and Ownership ” EIB 92 Economic Research Service
• Nickerson, C., J. Ifft, T. Kuethe, and M. Morehart (2012) “Farmland Values on the Rise: 2000 – 2010 ” Amber Waves
• Kuethe, T.H., J. Ifft, and M. Morehart (2012) “The Influence of Urban Areas on Farmland Values” Choices 26 (2).
• Ifft, J. and T.H. Kuethe (2011) “Why Are Outside Investors Suddenly Interested in Farmland ?” ARE Update 15(1): 9-11.
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