farm value trends
TRANSCRIPT
Farm Value TrendsHow High Could Prices Go?
Paul Pittman, Chief Executive OfficerFarmland Partners Inc.
January 2021Des Moines, Iowa
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Forward Looking Statements
Farmland Partners Inc. (the “Company”) is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns approximately 154,500 acres in 16 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota,and Virginia. We have approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014.
This presentation includes "forward-looking statements" within the meaning of the federal securities laws, including, without limitation, statements with respect to the return of farmland values, crop prices and crop yields. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates"or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance. Any forward-looking information presented herein is made only as of the date of this presentation, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Land Value TrendsDisclaimer
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Paul PittmanChief Executive Officer
Began investing in farmland in the mid-90s
Built a privately held portfolio of over 30 farms, comprising over 7,000 acres (approximately $100 million)oMost of these properties formed FPI’s initial IPO portfolio
Served as Chief Executive Officer since the initial public offering in April 2014
Contact: [email protected]
30 years experience as an investment banker, farmland investor and operator
Select Career Highlights Prior to FPI
Land Value TrendsIntroduction
Des Moines, Iowa January 12th, 2021
Largest Publicly Traded Farmland REIT in USo Over 150,000 acres between 340 farms across 16 states, over 100 tenantso Approximately $1.1B in assetso Annual revenues of approximately $50M
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Stars indicate FPI offices Circles indicate FPI farms and cost basis
Farmland Partners Inc. is an internally managed, publicly traded (NYSE: FPI) real estate company that owns and seeks to acquire high-quality farmland throughout North America
Land Value TrendsAbout Farmland Partners
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If trends continue, the best farmland in Illinois and Iowa will return to $12,000 per acre or more, exceeding values seen in 2013
Land Value TrendsLand Values are Likely to Increase Substantially
Reasons: Risks:
Increasing Commodity Prices Value of US Dollar, Change in Supply and Demand
Increase in Trendline Yield
Increase in Farm Operator Productivity
Reduction & Stabilization of Input Costs Potential Government Regulation
Low Interest Rates Higher Interest Rates
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$4.22 $4.84
$12.97
$13.12
$6.05$6.41
$0
$2
$4
$6
$8
$10
$12
$14
$16
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Corn Soybean Wheat
Year End Commodity Prices 2007 - 2020
Source: “The Long Term Perspective on Markets.” Macrotrends, www.macrotrends.net/.
Year-end commodity prices are returning to 2013 levels
Land Value TrendsCommodity Prices
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China’s Grain Imports (1000 MT)
70,364
100,000
3,277
16,500
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Soybean Imports Corn Imports
China’s soybean imports have increased 42% since 2013China’s corn imports have increased 404% since 2013
Sources: 1) Thukral, Naveen, and Hallie Gu. “Exclusive: China Eyes More Corn Imports as Shipments Surge, Set to Become Top Buyer.” Reuters, Thomson
Reuters, 23 Oct. 2020, www.reuters.com/article/us-china-corn-imports-excusive-idUSKBN2780W8. 2) “China Soybean Oilseed Imports by Year.” China Soybean Oilseed Imports by Year (1000 MT),
www.indexmundi.com/agriculture/?country=cn&commodity=soybean-oilseed&graph=imports.
Land Value TrendsChina’s Imports of Key Grains
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45.6
50.0
38
40
42
44
46
48
50
52
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Soybeans Trendline Yield (bushels/acre)
2013-2021 CAGR = 1.16%
Source: United States Department of Agriculture (2021 is FPI estimate)
Land Value TrendsSoybean Trendline Yield
161.8
179.3
120
130
140
150
160
170
180
190
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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Corn Trendline Yield (bushels/acre)
2013-2021 CAGR = 1.29%
Source: United States Department of Agriculture (2021 is FPI estimate)
Land Value TrendsCorn Trendline Yield
Variable Rate Technology (VRT)o Variable Rate Fertilizationo Variable Rate Seeding
Water Use Efficiency Tools Speed of Field Operations, Especially Planting and Spraying Data Collection and Enhanced Visualization Tools Remote Sensing, Aerial Imaging, Better and Faster Scouting
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Farm operator cost structure and efficiency on a per bushel basis have historically always been improving, and that trend is likely to continue
Land Value TrendsReduction and Stabilization of Input Costs
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10 Year Treasury Yield
Source: “10 Year Treasury Rate - 54 Year Historical Chart.” MacroTrends, www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Land Value Trends10-Year Treasury Yield
The US corn trendline yield has increased from 161 bushels/ac in 2013 to 179 bushels/ac in 2021
The US soybean trendline yield has increased from 46 bushels/ac in 2013 to 50 bushels/ac in 2021
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Corn
Soybeans
Corn and Soybean prices are estimates of local cash prices that could be achieved by fall of 2021.
Increase in Yield × Price of Bushel = Extra Revenue/acre ÷ Cap Rate = Value of Extra Revenue/acre 4 bu/ac $12.50 $50.0 3.5% $1,429/ac
Increase in Yield × Price of Bushel = Extra Revenue/acre ÷ Cap Rate = Value of Extra Revenue/acre 18 bu/ac $4.60 $82.8 3.5% $2,366/ac
Food for thought: Shouldn’t Illinois and Iowa top quality land prices be $1,500 - $2,000 per acre higher than 2013 levels?
Land Value TrendsEffect of Trendline Yield Increase on Land Values
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