Farmland Update by Mike Walsten
Land Values Continue An ‘Orderly Adjustment’ Lower, Survey Says
The decline in Corn Belt farmland prices continued in 2016. The average value of an acre of Iowa farmland decreased 5.9% in 2016, according to the annual Iowa State University Land Value Survey conducted by Wendong Zhang. The decline marks the third straight decrease since land values peaked in 2013.
The survey pegged the value of an average acre of Iowa farmland at $7,183 as of Nov. 1, 2016. That compares to the high of $8,716 an acre posted in 2013. That represents a value decline of 17.6%. Values fell 3.9% in 2015 and 8.9% in 2014.
“The golden era of phenomenal, yet abnormal, growth in farm income and land values, as we saw from 2006 to 2013, is already behind us,” Zhang says. “The land market is going through an orderly adjustment, while the U.S. agricultural sector, a competitive industry, is trying to adjust to the old normal of zero industry-wide net profits.”
He continues: “For a pessimist, there are reasons to worry, especially for landowners and/or producers who are over-leveraged. For an optimist, this decline is still modest, and the probability of a replay of the 1980s farm crisis is low.”
Factors that make another farm crisis less likely include the steady accumulation of farm income before the downturn, a stronger government safety net and an overall lower debt level in agriculture, Zhang points out.
To read Mike Walsten’s “Your Precious Land” blog, visit agweb.com/blog/your_precious_land.
By Nate Birt
Ask an Analyst: Ted Seifried | Zaner Ag Hedge
What is your commodity marketing philosophy?
When prices are high, it’s pretty easy. We want to lock a floor underneath and protect profit margin. With lower prices, we are managing opportunity.
What distinguishes your consulting firm from others?
We provide individual custom-tailored service that suits your farm.
What’s one action every producer should take to manage marketing risk?
If we use the past four years as a road map, we’ve had two opportunities to sell—one at the end of December, the other at the end of May into June. Have a price target, set your orders and let the market come and get them. If the market doesn’t come and get them, we can look at Plan B. There are things we can do to replace that opportunity so you can still make cash sales yet have upside potential on a weather issue.
What percentage sold should farmers be on their crops?
We would have liked to see producers 20% to 30% sold on new-crop corn and soybeans by the end of December. We would like to see producers between 40% and 60% sold on those crops by the second week of June. Our recommendations are not the same every year, but they have been similar for the past three years.
Which marketing tool is most underappreciated?
Options might not be as good at futures at capturing 10¢ or 15¢ moves, but they are very good at capturing directional moves. As hedgers, that’s what we’re really worried about.
Which experts in our industry do you respect greatly for their business advice?
I think very highly of Chip Flory. We’ve been friends for a while. For a very long time, Virgil Robinson of “Market to Market” was sort of who I wanted to mold myself after. I think Arlan Suderman’s great. I think Brian Roach and Darin Newsom do a great job.
What activities do you enjoy?
I love making cars fast. I converted one of my cars to E85. If I retired right now, I would move to Hawaii and teach scuba diving.
By Nate Birt
Protein Push Will Challenge Prices
The supply side of the protein market is set to assume full control of the reins this year, meaning producers across multiple continents face price resistance.
That forecast, published this winter by Rabobank, suggests major protein expansion in the U.S., China and Brazil will push global production above the 10-year average.
These charts put protein’s next chapter into perspective. View the full report at rabobank.com by typing “global meat markets” into the search box.