Jul 30, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


April 2014 Archive for Your Precious Land

RSS By: Mike Walsten, Pro Farmer

Mike Walsten has covered major business trends in agriculture for more than 40 years.

Returns on Pension-Fund-Owned Farmland Decline in Q1 2014

Apr 30, 2014

Mike Walsten

Not surprisingly, returns on pension-fund-owned farmland slipped in the first quarter of 2014, according to the quarterly update from the National Council of Real Estate Investment Fiduciaries (NCREIF). The association's Farmland Index indicates a total return for the quarter of 2.41%, comprised of 1.53% appreciation and 0.88% income return. NCREIF is an association of professionals with significant involvement and interest in pension fund real estate investments. The NCREIF Farmland Index consists of 550 investment-grade farm properties; comprised of 406 annual cropland properties and 144 permanent farmland properties. The index includes 176 properties in the Corn Belt, 124 in the Pacific West, 66 in the Delta States, 54 in the Pacific Northwest, 46 in the Mountain States, 35 in the Lake States, 25 in the Southern Plains and 23 in the Southeast.

NCREIF notes the 2.41% first-quarter return is below the 5.44% total return of a year earlier and the 3.78% total return for the first quarter of 2012. The figure is also down compared to the fourth quarter of 2013's 9.26% total return. Christopher Jay, Chairman of the NCREIF Farmland Committee and Director of Financial Analysis with Prudential Agricultural Investments, notes: "The harvest of several different crop types, as well as the reappraisal of a disproportionate number of the properties in the index, take place in fourth quarter. Because of this, a first quarter drop off is not unexpected. The one-year total return remains strong at 17.44%."

There is typically a decline from the fourth quarter to the first quarter due to conclusion of the sale of the crops and the revenue sharing that goes with that. The average total return over the history of the index is 2.89% and the first quarter average is 1.84%. The 0.88% income return is the smallest since first quarter 2010.

The trailing four-quarter total return dropped significantly from 20.91% to 17.44%. That is the lowest total return over a four-quarter period since first quarter 2012. The split on the trailing four-quarter return was 8.42% appreciation and 8.57% income. The four-quarter rolling return from a year ago was 20.47%.

Annual cropland slightly outperformed permanent cropland in the first quarter. This property subtype performance is typical in the first quarter. This year, 2014, makes seven consecutive first quarters and 16 of the past 20 first quarters that annual cropland has outperformed permanent cropland. Annual cropland returned 2.42%, split 1.52% appreciation and 0.91% income. This was the second smallest income return for annual crops since the index began in 1991. The rolling four-quarter return declined to 11.92%, the lowest total return since second quarter 2011. The rolling four-quarter income return of 4.02% is the lowest since the index began.

The Pacific Northwest was the best performing region with a total return of 3.97%. This return just exceeded the Mountain region’s 3.56% and the Pacific West’s 3.36%. The Northwest’s return was split 3.41% appreciation and 0.56% income. The region’s return was driven by annual crops, which returned 8.27% including 1.21% of income and 7.06% appreciation. On a rolling four-quarter basis, the Pacific West’s 30.96% was more than double the next closest region.

The Lake States and the Delta States were the worst performing regions for the quarter with 0.30% and 0.80% total returns, respectively. The Lake States had (0.47%) appreciation and the Delta States (0.11%). The Southern Plains also had negative appreciation, (0.02%). On a rolling four-quarter basis, the Southern Plains had the lowest total return, 7.89%.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Iowa Notes 3.7% Decline in Average 2014 Cash Rent

Apr 28, 2014

Mike Walsten

The average cash rent in Iowa for 2014 slipped $10 to average of $260 an acre, according to the annual statewide survey of farmers, landowner, ag lenders and farm managers conducted by Iowa State University. While down 3.7% from a year earlier, 2014's average cash rent is 3% higher than 2012's state average of $252 and well above 2010's statewide average of $184 an acre.

On a regional basis, the west central crop reporting district now boasts the highest average cash rent at $288 an acre. That compares to last year's district average of $294 an acre. Last year' highest-priced district, the central district, lists a district average of $284 in 2014. That is down $13 an acre from last year's $297 average. The northwest crop reporting district reports a 2014 average of $270, down 4.6% from last year's $283 an acre. The north-central district reports the sharpest annual decline, an 8.2% decrease, with an average of $270 an acre. That is down from 2013's average of $294 an acre. The northeast crop district lists a 2014 average of $277 an acre, down 1.4% from last year's $281. The east-central district lists an average of $273 an acre, down 3.9% from last year's $284. The southwest crop reporting district reports a 2014 average of $249 an acre, down 3.1% from 2013's $257 an acre. The south-central district reports the lowest district average at $202 an acre. That is down 3.8% from 2013's average of $210 an acre. The southeast district reports an average of $229 an acre, which is unchanged from 2013.

We will have more details in the next issue of LandOwner newsletter.

For the full report, click here.
 

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Decline in Returns on Pension-Fund-Owned Farmland Q1 of 2014

Apr 25, 2014

Mike Walsten

Not surprisingly, returns on pension-fund-owned farmland slipped in the first quarter of 2014, according to the quarterly update from the National Council of Real Estate Investment Fiduciaries (NCREIF). The association's Farmland Index indicates a total return for the quarter of 2.41%, comprised of 1.53% appreciation and 0.88% income return. NCREIF is an association of professionals with significant involvement and interest in pension fund real estate investments. The NCREIF Farmland Index consists of 550 investment-grade farm properties; comprised of 406 annual cropland properties and 144 permanent farmland properties. The index includes 176 properties in the Corn Belt, 124 in the Pacific West, 66 in the Delta States, 54 in the Pacific Northwest, 46 in the Mountain States, 35 in the Lake States, 25 in the Southern Plains and 23 in the Southeast.

NCREIF notes the 2.41% first-quarter return is below the 5.44% total return of the first quarter of 2013 and the 3.78% total return for the first quarter of 2012. The figure is also down compared to the fourth quarter of 2013's 9.26% total return. Christopher Jay, Chairman of the NCREIF Farmland Committee and Director of Financial Analysis with Prudential Agricultural Investments, notes: "The harvest of several different crop types, as well as the reappraisal of a disproportionate number of the properties in the index, take place in fourth quarter. Because of this, a first quarter drop off is not unexpected. The one-year total return remains strong at 17.44%."

There is typically a decline from the fourth quarter to the first quarter due to conclusion of the sale of the crops and the revenue sharing that goes with that. The average total return over the history of the index is 2.89% and the first quarter average is 1.84%. The 0.88% income return is the smallest since first quarter 2010.
 

The trailing four-quarter total return dropped significantly from 20.91% to 17.44%. That is the lowest total return over a four-quarter period since first quarter 2012. The split on the trailing four-quarter return was 8.42% appreciation and 8.57% income. The four-quarter rolling return from a year ago was 20.47%.
 

Annual cropland slightly outperformed permanent cropland in the first quarter. This property subtype performance is typical in the first quarter. This year, 2014, makes seven consecutive first quarters and 16 of the past 20 first quarters that annual cropland has outperformed permanent cropland. Annual cropland returned 2.42%, split 1.52% appreciation and 0.91% income. This was the second smallest income return for annual crops since the index began in 1991. The rolling four-quarter return declined to 11.92%, the lowest total return since second quarter 2011. The rolling four-quarter income return of 4.02% is the lowest since the index began.
 

The Pacific Northwest was the best performing region with a total return of 3.97%. This return just exceeded the Mountain region’s 3.56% and the Pacific West’s 3.36%. The Northwest’s return was split 3.41% appreciation and 0.56% income. The region’s return was driven by annual crops, which returned 8.27% including 1.21% of income and 7.06% appreciation. On a rolling four-quarter basis, the Pacific West’s 30.96% was more than double the next closest region.
 

The Lake States and the Delta States were the worst performing regions for the quarter with 0.30% and 0.80% total returns, respectively. The Lake States had (0.47%) appreciation and the Delta States (0.11%). The Southern Plains also had negative appreciation, (0.02%). On a rolling four-quarter basis, the Southern Plains had the lowest total return, 7.89%.
 

 

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Rise in Value of North Dakota Farmland Cools, Still 8% Higher

Apr 15, 2014

 

Mike Walsten

The torrid rise in the value of North Dakota farmland cooled in 2013, but the market, as a whole, still shows an annual gain of 8% for 2013. That's according to Andrew Swenson, North Dakota State University Extension Service farm management specialist. His estimate is derived from the published results of a January 2014 county survey commissioned by the North Dakota Department of Trust Lands.

“Land values showed about an 8% increase from the previous survey, compared with a 42% increase during 2012,” Swenson says. “It is quite possible that land values peaked in the last few months of 2013, when the financial impact of lower crop prices became more evident, especially in the Red River Valley, where two major crops, corn and sugar beets, had negative returns, on average.”

Land values in the northern Red River Valley region showed a 4% decline (to $3,283) from January 2013 to January 2014 after a 56% increase the previous year. All other regions had positive year-to-year results, with the lowest being 3% (to $4,319) in the southern Red River Valley counties and (to $2,058) in the northeastern region.

“Unless crop prices have a significant rally, it is likely that next year’s survey will confirm that the historic 11-year run in land values, averaging an annual increase of 15%, is over,” he observes.

The reality of crop price declines was abrupt. In 2013, net farm income dropped more than 80% in the Red River Valley and approximately 50% in the rest of the state, according to results from those enrolled in the Farm Business Management Education program.

“In addition, 2014 projected crop budgets were sobering,” Swenson says. “Producers and their bankers are more cautious about jumping on the land escalator. However, if interest rates remain low and cash prices stabilize above $4 per bushel for corn, $11 for soybeans and $6.50 for wheat, it is possible that land values may have a soft landing.”

The largest increase in cropland values (January 2013 to January 2014) was about 28% (to $1,278) in the southwestern region, nearly 15% (to $1,738) in the north-central region and 13% (to $1,523) in the south-central region. Three regions, east-central (to $2,490), southeastern (to $3,183) and northwestern (to $950), had increases of 8% to 10%.

“The survey indicated that land rents, as typical, did not change as much in percentage as land values,” Swenson says. “On average, cropland rents increased about 4% (January 2013 to January 2014).”

Surprisingly, the largest increase was 8% (to $124.20) in the southern Red River Valley. The average rent increased about 7% (to $60.10) in the south-central and (to $38.50) southwestern regions. Rents increased 4% to 5% (to $49.90) in the north-central, (to $56.70) in the northeastern and (to $96.80) in the southeastern regions. Crop land rent increased by only 2% (to $66.90) in the east-central region and had slight declines (to $34.70) in the northwestern region and (to $89) the northern Red River Valley.

Swenson cautions that the values and rents are averages for large multicounty regions. Prices can vary considerably within a region because of soil types, drainage and location.
 

 

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Log In or Sign Up to comment

COMMENTS

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions