current agriculture financial climate: economic indicators to watch
TRANSCRIPT
Current Ag Financial Climate: Economic Indicators to Watch
2015 Women Managing the Farm
Amy Gales, EVP Regional Agribusiness
CoBank
February 5, 2015
Indicators
Commodity Prices
Interest Rates
Land values & Cash Rent
Domestic Economy
World Economy
Talent
Technology
Risk Management
Financial Management
Indicators to Watch—As you Manage your Farm
Confidential and
Proprietary2
Norwegian Icebreaker
Confidential and
Proprietary3
As you may have seen on the news it's been very cold in the Midwest …..So cold, in fact, that the City Government has borrowed a Norwegian Icebreaker to clear the Mississipppi River for fishing and migrating waterfowl.
December 2013 December 2014
Ec
on
om
y
U.S. real GDP
growth
1.9% 9 months 2013 actual (annualized)
2.5% - 2.9% 2014 forecast
2.7% 9 months 2014 actual (annualized)
3.0% - 3.1% 2015 forecast (IMF & World Bank)
10-yr U.S.
Treasury
3.03%
A new high for 2013
2.17%
Future interest
rates 4.69% January 2019 5-year swap rate forecast 2.79% January 2020 5-year swap rate forecast
Home prices 10% increase projected for 2014 3% - 4% increase projected for 2015
Unemployment 7.00% (November) 5.80% (November)
Inflation 1.31% Core PCE (November) 1.41% Core PCE (November)
Co
mm
od
ity
Pri
ce
s *
Corn $4.28/bu $3.97/bu
Soybeans $13.32/bu $10.19/bu
Wheat $6.09/bu $5.90/bu
Oil (WTI) $98.42/bbl $53.27/bbl
Volatility and Uncertainty Continue
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* Nearby future prices
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* Nearby future prices
Interest Rate Yield Curve
Confidential and
Proprietary10
10 Year Interest Rates
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Proprietary11
Interest rate movements have two important impacts on farmland values
Expected
Farm Income
Capitalization
Rates
Farmland
Values=÷Interest
Rates
Sale Price Cash Rent
2006 $1200 $74
2007 $1260 $82
2008 $1450 $92
2009 $1500 $89
2010 $1600 $95
2011 $1900 $105
2012 $2400 $119
2013 $3000 $137
2014 $3280 $126
Kansas Price Per Acre-Irrigated Cropland
Kansas Agricultural Statistical Districts13
Value of the Dollar
Confidential and
Proprietary16
“If I were running a company today, I would have one priority above all
others: to acquire as many of the best people as I could …[because] the
single biggest constraint on the success of my organization is the ability to
get and to hang on to enough of the right people.” — Jim Collins
Talent and Engagement
Confidential and
Proprietary17
“If automobiles had followed the same development cycle as the
computer, a Rolls-Royce would today cost $100, get a million miles per
gallon, and explode once a year, killing everyone inside” ~ Robert
Cringely
Technology
Confidential and
Proprietary18
Information Technology in Agriculture
Confidential and
Proprietary19
Questions?