In This Issue
Billionaire NFL Owner Quietly Buying Up Thousands of Acres of Illinois Farmland
Illinois billionaire Shahid Khan is known for building the automotive parts company Flex ‘N Gate, based in Urbana, IL, into a global manufacturer with 69 facilities around the world.
He also is known as the owner of the National Football League team Jacksonville Jaguars and the UK’s Fulham F.C. soccer team.
In addition, he has given millions of dollars to his alma mater, the University of Illinois at Urbana-Champaign, and millions to other charitable causes.
In recent years, he has added to investments by quietly purchasing farmland through a company he owns called Baloo Enterprises LLC. A spokesperson for Khan confirmed earlier this month that Khan has purchased roughly 24,000 acres of farmland in central Illinois.Read the Full Story
New Bill Would Create Market to Buy, Sell Water Rights in Nevada
Rural water users are panicking over a proposal to create a market for the sale and purchase of water rights in Nevada, unconvinced by arguments that the concept would encourage conservation.
Read the Full Story
Lawmakers on Monday weighed whether so-called “water banking” would be preferable to prevailing water law doctrines that govern surface and groundwater rights disputes in the driest state in the U.S.
A legislative hearing about two proposals to allow water rights holders to sell their entitlements pitted state water bureaucrats against a coalition of farmers, conservationists and rural officials.
Elimination of Stepped-up Basis Poses Hazards to Family Farms
Capital gains taxes are based on the change in the value of an asset, such as farmland, livestock or timber, when that asset is sold. Currently, the top capital gains tax rate is 20%. To reduce the capital gains tax, farmers and ranchers use stepped-up basis, which provides a reset for the basis during intergenerational transfers. In effect, upon the transfer of assets following a death, the basis is reset to the market value at the date of death. Following the adjustment, taxes can be levied only on gains realized by the individual during his or her ownership, not on gains realized prior to the step up in basis.
Any change in capital gains tax policy that eliminates or scales back stepped-up basis could result in a massive tax burden on the agricultural sector. The magnitude of the burden depends on the change in the asset value, but it would likely significantly exceed the annual income generated by the assets. In fact, it could take years of returns to equal the amount of the tax. Using USDA’s 2020 Land Values Summary, the change in cropland values from 1997, and cash rental rate data, and assuming a capital gains tax rate of 20%, today’s article estimates the capital gains tax as a share of cash rental rates on cropland and the number of years needed to pay the capital gains tax (based on cash rental rates) if the tax is fully capitalized into the value of land and the step up in basis is not preserved.Read the Full Story
Drought Intensifies, 70% Of North Dakota Classified ‘D3 Extreme’
The drought monitor released April 8, looking back on March 30 to April 6, indicated intensifying drought in the Dakotas. Kentucky, Missouri, and Tennessee are still reporting no drought stress at all.
In the No. 1 corn-growing state, drought conditions were unchanged from the previous week. A small amount of precipitation was recorded in the northern half of Iowa but, it wasn’t enough to put a dent in the extreme drought conditions stretching across Sioux, O’Brien, and Clay counties. About 6% of the state is suffering from severe drought.
In conjunction with the April 5 Crop Progress Report, Iowa State Climatologist Justin Glisan noted topsoil and subsoil moisture levels across the Hawkeye state. “Topsoil moisture levels rated 8% very short, 25% short, 64% adequate and 3% surplus. Subsoil moisture levels rated 12% very short, 29% short, 56% adequate and 3% surplus,” he reported.Read the Full Story
Drivers Are Returning to the Road. That Is Good News for Corn Growers.
Corn prices have hit their highest levels in almost eight years. Analysts say they are likely to get a further boost from motorists.
Drivers returning to the road are expected to lift demand for ethanol. About 40% of the U.S. corn crop goes to producing the gasoline additive, and consumption has plunged amid the pandemic. Now ethanol producers envision a rebound powered by economic reopenings and a potential wave of bioenergy-friendly regulations from the Biden administration.
Corn prices have already climbed about 50% over the past six months, lifted by increased demand from China. That country is buying more row crops in an attempt to bounce back from the African swine fever’s destruction of its hog herds and meet targets set in its recent trade agreement with the U.S. Chinese corn imports in the first two months of 2021 were more than five times higher than a year earlier, German bank Commerzbank AG said in a note last week.Read the Full Story
Texas Land Values Continue to Rise
Back ten years ago, most East Texas land was selling for $1,000 an acre, or less. But this has changed drastically. The last year has been crazy. Land values across Texas have escalated in most regions. In the last few months lots of rural land has been put on the sales market.
Charles Gilliland, Texas A&M land economist, now says that statewide land prices are averaging $3,064 an acre. In parts of Texas near major cities, rural land is often priced at $10,000 an acre, or more. Prices are up considerably except for the Panhandle and South Plains. Buyers of rural land want scenic properties, with decent access to major cities. The mainly farm and ranch country in the Lubbock and Amarillo areas is not in as much demand as elsewhere in Texas. Most of the potential buyers are not as interested in raising cotton or grain—but hunting deer, quail and being gentlemen landowners.
How times have changed.Read the Full Story
Conservation Easements Reach Milestone of Five Million Acres
The U.S. Department of Agriculture (USDA) recently reached a milestone pertaining to conservation easements. More than five million acres of wetlands, grasslands, and farmland have been protected through USDA’s Natural Resources Conservation Service (NRCS). The total represents an area roughly the size of New Jersey. There have been 110,000 acres of newly enrolled conservation easements since October, which has helped reach the latest milestone.
“USDA is committed to partnering with our nation’s farmers, ranchers, and private landowners to conserve our nation’s natural resources for future generations and deliver conservation and recreational benefits to rural America,” said Agriculture Secretary Tom Vilsack said in a news release. “We celebrate their efforts in helping us protect sensitive lands, create jobs, expand access to the outdoors, and help tackle climate change. We look forward to building on these partnerships.”
More than 2.8 million acres of wetland easements have helped improve the conditions of waterways nationwide. Wetland easements help reduce flood risk, improve water quality, protect biological diversity, and recharge groundwater. Nearly two million acres of agricultural land easements have helped to protect valuable farmland from urban encroachment. Ag land easements, which include grassland easements, protect the long-term viability of the American food supply chain.Read the Full Story
ASFMRA Government Relations Update
President Biden Releases FY2022 “Skinny Budget” Request
Both the House and Senate return to Washington this week after a two-week district work period. Secretary Vilsack is scheduled to testify Wednesday before the House Agriculture, Rural Development, FDA, and Related Agencies Appropriations Subcommittee which is chaired by Representative Sanford Bishop (D-GA).
Last week President Biden’s FY 2022 budget request
was sent to Capitol Hill by acting OMB Director Shalanda Young. The budget request is in summary form with the detailed budget to follow sometime in May. The request also only covers programs funded by the appropriations committees, so it does not include any proposals related to mandatory or entitlement programs like crop insurance or farm programs.
The USDA portion of the budget request starts on page 18 (link above). The Biden Administration is seeking a 16 percent increase, $3.8 billion, in USDA spending over FY 2021. More than a quarter of the increase is requested for USDA nutrition programs. Additionally, the budget requests an increase of nearly $650 million for agricultural research, education and outreach programs, more funding to fight wildfires, expand broadband access, and funding to help rural electric providers to shift to clean energy. Any crop insurance proposals will come forward when the more detailed budget is released in May.Biden Administration Releases Rural Infrastructure Fact Sheet
The White House released a 3-page “fact sheet”
detailing how its infrastructure plan will impact rural America. The plan includes $5 billion for a new Rural Partnership Program to support inclusive community and economic development. Up to $100 billion for rural broadband investment and interestingly, the plan also includes $1 billion for agricultural resources management and climate smart technologies. It is unclear how much of the funding is included in the President’s FY 2022 budget request, how much would be considered existing program spending and how much would be considered “new spending.”Stepped-Up Basis Debate
A group of Democrat Senators led by Senator Van Hollen (D-MD) have introduced a bill, the Sensible Taxation and Equity Promotion (STEP) Act
to eliminate stepped-up basis and tax unrealized capital gains on inherited property. The bill would allow all individuals to exclude up to $1 million in unrealized capital gains from this tax. The American Farm Bureau Federation has published a response
(seen above) on its website to show the impact on family farms across the country. The Economic Research Service (ERS) also recently published an article
on how many farm estates were subject to estate taxes in 2020.
In Memory: Roger Heller, AFM, Olivia, Minnesota
The ASFMRA was honored and pleased to welcome Roger into the membership in 1963. He obtained his Accredited Farm Manager (AFM) designation and maintained his Accredited membership. Roger passed away in Arizona. We have been informed that funeral arrangements are being made for either late May or June. You can send cards to: Heller Realty; P.O. Box 26; Olivia, MN 56277. Roger made many friends through his association with the ASFMRA who will miss him greatly. Our thoughts and prayers are with his family.
In This Issue