Ag News, July 10, 2013

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Muddling Today’s Land Reality
By Roy C. Ferguson II, CMC/CAC

The mental contortions are amazing that various apologists for today’s mindboggling agricultural land prices are espousing to “explain” how they are still a bargain…so not to worry! Adding to the situation’s dangerous complexity, national data are being used very selectively to “illustrate” scenarios that are either extremely rare or simply don’t exist.

Recent quotes from three publications are representative of what is being written. One discussed land valued at $8,300 per acre which produced corn averaging 180 bushels per acre that rented for $331.17 per acre. Applying a suggested corn price of $5.52 per bushel equals $993.60 Total Revenue with Rent Expense equaling a risky 33.3% of Total Revenue, although the writer suggests that everyone should be happy.

But, what happens if a renting producer fiddles around and watches corn sink to $4.52 per bushel? Rent Expense rockets upward at that point to an exorbitant 40.7% of Total Revenue! Moreover, the land owner is pocketing a Return On Investment of only 3.99%…which obviously isn’t too swift either if he/she/it has any Debt on the land to pay.

Another quotation observed quite correctly that the ultimate value of farmland is a function of the Income it will produce…and current land values reflect that fact. But, one has to swallow hard to accept the last seven words.

What about the High Cost producers who insist this year’s Corn Production Costs will equal $5.50 per bushel, or more. Those who procrastinate this year…and their are many…run a strong risk of actually suffering Operating Losses. The land they had coveted so long that they purchased it for $8-16,000 per acre suddenly becomes a huge albatross.

Of course, the common refrain from the crowd that sees no economic problem with recent, escalating land values chants not-to-worry since most Land Sales have been for Cash. Unfortunately, USDA data don’t confirm that hypothesis as accurate. U.S. agriculture’s Total Liabilities have increased 2.9% as Long Term Liabilities which reflect Land Debt primarily have also moved upward by 2.84% equaling a huge $33 billion increase. Meanwhile, the value of Long Term Assets is expected to increase by only $17.6 billion.

So, claiming that most Land Sales represent Cash Transactions doesn’t come even close to being accurate. Even if it did, what about the poor souls who have leveraged out their wazoo? While precious few land buyers during the past three years have been millionaires, far too many are now millionowers.

Still another discussion stressed splitting hairs over the “big difference between a bursting [land] bubble and correcting trends.” It continued with, “There is very little debt involved in most Midwestern farmland sales. And the industry Balance Sheet has never been better.” Even so, the commentary added, “At some point, in fact, corrections are likely.”

If grain prices collapse by (35-45%) from their recent highs as some analysts are warning, the ensuing financial and emotional pandemonium will inevitably trigger a steep slide in land values. Those who are caught by the adverse turn of events will consider it immaterial whether the disaster was a “bubble” or “correction.” Copyright 2013. The Ferguson Ag Report

Another year to live with the ’08 farm bill?
Kiplinger Agriculture Letter

Despite broad Senate support to pass a ’13 farm bill, the House GOP leadership is badly split on what to do. Farm staters of both parties want a five-year bill now, but it’s blocked in a standoff over food stamp funding. Copyright 2013. The Kiplinger Washington Editors, Inc. Login to Member Resources and download the latest issue:

USDA Boosts Projected 2013-crop Corn, Wheat Prices

A season average on-farm price of $4.80 a bu. for new-crop corn is the latest projection from USDA. In its mid-month assessment of key supply and demand factors, USDA now projects new-crop corn prices will range from $4.40 to $5.20 per bu., up 10¢ at both ends of the range from its previous projection.
Login to Member Resources to download the latest edition of LandOwner:

Rabobank predicts fourth year of global sugar surplus
Farm Press Staff – Western Farm Press

From Rabobank
A Rabobank report suggests that the global sugar market will continue its surplus into 2014.

In the report, published by the bank’s Food & Agribusiness Research and Advisory team, the global sugar market continued its downtrend over the last few months. NY No. 11 prices reached USc 16.21/lb. in mid-June, a level not seen for three years.

Projections for most of the key producing countries are heading towards meeting or exceeding expectations for the 2012/13 international crop year. The current supply/demand balance features the largest surplus in the last 15 years.
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Who Inspires You? Nominate them Today

Each year ASFMRA members honor their own…
The best and brightest that inspire them to achieve more.

Nominations are now open for these awe-inspiring awards:

•Appraisal Professional of the Year
•D. Howard Doane Award
•Early Career Award
•Meritorious Service in Communication
•Carl F. Hertz Distinguished Service to Agriculture (individuals, companies, or associations are accepted for the last two awards)

Get complete info on nominating and individual or company:

The water that divides us: Part I
By Logan Hawkes

Tough times call for tough actions. That’s what many Rio Grande Valley lawmakers, farmers, ranchers, irrigation district and community officials and business leaders are saying this summer as extreme drought conditions dry up water reserves, reduce profits and continue to plague residents and businesses in Deep South Texas.

To make things even tougher, Valley leaders say the current trouble can’t be blamed solely on Mother Nature, but also on Mexican water officials who many say have failed to deliver water due South Texas according to a 1944 water treaty.
Read more on the Southwest Farm Press website:

Part 2: South Texas water crisis is drawing a line in the sand
By Logan Hawkes

With two years of ongoing drought and water treaty issues with Mexico, it’s no surprise that planted crop acres are down as cattle herds continue to shrink across South Texas. Lawmakers, community leaders, and representatives of business and industry are forced to contemplate the impossible—life on the frontier without enough water to sustain it.

Life in the arid Southwest—especially in the Borderlands—depends on the great river, the Rio Grande as it is known in the north, the Rio Bravo south of the border. For 900-plus miles this ribbon of life-sustaining water runs down the length of the international border separating Texas and Mexico, fed on the U.S. side by the Pecos River that gently flows down the eastern slopes of New Mexico and across West Texas canyon country, converging with the big river at Lake Amistad southwest of San Antonio.
Read more on the Southwest Farm Press website:

Applications being accepted for Leadership Institute

Attendees report that this event is one of the most valuable ones they have ever attended. Here is what others are saying:

• A well-rounded week of training, networking, DuPont Pioneer updates and gaining a better understanding of how things work in D.C.
• A great opportunity to grow professionally and voice my thoughts with congressional delegates from my state.
• Things I learned at Leadership Institute will last a lifetime and have made me a more effective leader in my organization.

Spaces are limited so register now! Online applications are being accepted via this link: If you have any questions, please contact Suzanne at 303-758-3513, Ext 101 or
Learn more about this event:

Announcements from The Appraisal Foundation

The Appraiser Qualifications Board (AQB) has issued Q&As on the following topics:
• Qualifying Education – Distance Education Examinations
2015 Real Property Appraiser Qualifications Criteria – Related Issues
• Firm Date Implementation
• Supervisory Appraiser/Trainee Requirements
• Supervisory Appraiser/Trainee Appraiser Course
Issued June 2013
Send questions to: 

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