Signs of Weakening Farmland Values
Several indicators point to weakening farmland values.
Jim Rothermich, ARA, with Iowa Appraisal tells Brownfield he tracks every land auction in the state and says there were at least nine no-sales in February.
“That is a drastic increase. A year ago, February 2023, we had two. So that’s how big a difference there is right now.”
A no-sale occurs when the property isn’t sold because a reserve price has not been met.
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Common Offer to Lease Farmland for Solar Panels: $1,000 an Acre
More than half of large U.S. farmers say they have been offered at least $1,000 an acre during discussions about planting solar panels instead of crops on their land, said a Purdue University poll released on Tuesday. Bids have climbed rapidly since 2021, when the most common offer was less than $750 an acre.
“Interest in leasing farmland for solar energy development continues to be strong,” said Purdue’s monthly Ag Economy Barometer. One in 10 of the large-scale farmers questioned by Purdue reported having actively engaged in discussions over a solar lease in the past six months, roughly the same rate as a year ago.
“Payment rates offered varied widely, but it was notable that over half of respondents were offered a lease rate of $1,000 an acre or more,” wrote agricultural economists Jim Mintert and Michael Langemeier, who oversee the Ag Barometer.
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South Dakota Ranch Asks $31.7 Million — Bison Not Included
An almost 27,000-acre wild and rugged bison ranch in South Dakota has hit the market for a whopping $31.7 million.
That eight-figure price tag makes the Dakota Partnership Ranch, which includes a five-bedroom main residence at its center, easily the most expensive offering on the public market in the Mount Rushmore State.
Ten miles of Dry Creek run through the ranch, and its diverse terrain includes natural springs, ponds, ridges, grass plains and badlands.
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USDA: Expiring Estate Tax Provisions Would Increase Taxes for Farm Estates
The 2017 Tax Cuts and Jobs Act (TCJA) made significant changes to Federal individual income and estate tax policies, though some policies were temporary. In 2018, the TCJA increased the estate tax exemption amount from $5.49 million to $11.18 million. This increase is set to expire at the end of 2025.
The exclusion amount will revert in 2026 to the pre-TCJA level, adjusted for inflation, of $6.98 million per deceased person. For married couples, a portability provision in estate tax law allows the surviving spouse to use any unused portion of the deceased spouse’s exemption.
Researchers with the USDA, Economic Research Service (ERS) estimated the expiring increased exemption would be $13.95 million per person at the time of the expiration. Lowering the level of the estate tax exemption in 2026 is estimated to increase the percent of farm operator estates taxed from 0.3 to 1.0. This means that of the estimated 40,883 estates that are expected to be created in 2026, the expiration of the increased exemption would raise the number of estates that owe tax from 120 to 424.
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Bare Knuckle Conservation Easement Brawl Leaves Participants in Limbo
Two recent tax court cases paint an ominous picture for professionals and investors who participated in listed syndicated conservation easement transactions. Coming on the heels of the Fisher conviction and his lengthy sentence; these cases show how the evidence in IRS civil proceedings may lead to criminal exposure for professionals and significant liabilities for investors.
In Oconee, the Tax Court found that the donor, through the syndicator, had a meeting of the minds with the appraiser where the parties agreed on the appraised value through evidence of emails and testimony. For example, on November 18th the parties were sent an updated “schedule show[ing] an estimated charitable contribution deduction, before carve-outs, of $60,608,700. Significantly, that figure was within 1% of the $60 million projection Mr. Novak had supplied at his initial meeting with Mr. Ciavola in February 2015” and before receiving an appraisal for the tract.
They were assured by Mr. Freeman, the promoter, that “[w]e all have the window and need to work within that window. The appraisers are pulling the exact figures together... The window you have is within the ballpark of reality and from that you all need to decide whether or not you are moving forward,” meaning their appraisal would be close in value to their revised easement numbers.
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ASFMRA Government Relations Update
Finally, FY 2024 Funding Provided
Six of 12 FY 2024 appropriation bills passed both the House and Senate last week and President Biden signed them into law to avoid a government shutdown on Saturday. The remaining six, which contain more controversial policy provisions, are set to expire March 22, 2024.
The House vote was 339-85 with a majority of Republicans (132) voting for passage along with nearly all Democrats. The Senate vote on Friday was 75-22. With nearly one-half of the fiscal year completed, the Department of Agriculture finally has a full year appropriation and no longer must plan periodically for a shutdown.
As reported in the most recent Weekly, the Risk Management Agency (RMA) Salaries and Expenses are slightly reduced from $66.87 million in FY 2023 to $65.64 million for FY 2024. Additionally, FPAC (Farm Production and Conservation Business Center) was funded at $244.183 million down from FY 2023 level of $248.684 million. The Farm Service Agency (FSA) Salaries and Expenses are funded at $1.515 billion down slightly from FY 2023 level of $1.542 billion and the Natural Resource Conservation Service (NRCS) technical assistance (salaries) are funded at $914.899 million down from $941.124 million in FY 2023.
Also of note, the agreement makes the Secretary of Agriculture a member of the Committee on Foreign Investment in the United States (CFIUS) with respect to covered transactions involving agricultural land, biotechnology, and industry. The agreement requires the Secretary to notify CFIUS of agricultural land transactions reported under the Agricultural Foreign Investment Disclosure Act (AFIDA) that may pose a risk to national security.
President Releases FY 2025 Budget Request
For the most part, the President’s budget request is largely ignored by Congress and this budget request is likely to follow that pattern. The Biden Administration did release its FY 2025 budget request March 11, 2024. The press will focus on the large ticket items. In the detail, the budget requests $65.95 million for RMA Salaries and Expenses and reproposes the permanent enactment of the Pandemic Coverage Crop Incentive Program ($5 an acre, estimated to cost $60 million annually). The budget requests $1.5729 billion for FSA Salaries and Expenses and $985.2 million for NRCS.
Senate Agriculture Committee Hears from Secretary Vilsack
During a hearing Secretary Vilsack appeared before the Senate Agriculture Committee. In a much calmer setting than his recent appearance before the House Agriculture Committee the Secretary again faced wide ranging questions about agricultural policy. Most importantly to crop insurance, Senator Stabenow (D-MI) asked Secretary Vilsack if he would be willing to use his authorities to “make adjustments” to Administrative and Operating (A&O) expenses. The Secretary stated he would be happy to research the question and agreed that workload increases (for crop insurance delivery) may justify additional reimbursement. He specifically cited the Administration’s rollout of new policies (12) and modifications (50). The clearly staged question and answer occurs starting at the 42-minute mark of the hearing.
Senator Stabenow Draws Bright Farm Bill Line
Speaking at a White House event, Senator Stabenow (D-MI) the Chair of the Senate Agriculture Committee said she is not willing to make changes to USDA’s ability to update the Thrifty Food Plan. She said, “I’m not going to do it” several times (starting around 56-minute mark) and indicated she is willing to protect nutrition programs rather than complete a farm bill this year even though she is retiring at the end of this Congressional session.
House Chairman GT Thompson (R-PA) has floated the idea of making future Thrifty Food Plan updates budget neutral after the Biden Administration’s most recent update increased SNAP spending significantly. The Congressional Budget Office (CBO) has scored such a change with $30 billion in savings according to House Committee staff.
Bipartisan Agriculture Labor Agreement
Last week, the bipartisan Agricultural Labor Working Group (ALWG) released its final report. The Working Group, which was co-chaired by Representative Rick Crawford (R-AR) and Don Davis (D-NC), contains 21 recommendations. Fifteen recommendations gained support from a majority of the working group members and six did not. The report also includes five recommendations that were considered but excluded. The Agriculture Committee does not have direct authority for agricultural labor issues and Congressional action based on the Report’s findings is unlikely.
Security Exchange Final Climate Report Rule
The Securities and Exchange Commission (“Commission”) is adopting amendments to its rules under the Securities Act of 1933 (“Securities Act”) and Securities Exchange Act of 1934 (“Exchange Act”) that will require registrants to provide certain climate-related information in their registration statements and annual reports. The final rules will require information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. Farm groups are generally supportive of the Commission’s decision to exempt “Scope 3” emissions from disclosure. Scope 3 emissions are those that occur in a company’s supply chain.
Farm Bureau Issues 2023 Disaster Report
The American Farm Bureau Federation issued a report detailing 2023 major agricultural disaster. The assessment puts total crop and rangeland losses from major 2023 disasters at over $21.94 billion, or 23.6% of NOAA’s total economic impact figure. Of that figure, nearly $12 billion in losses were covered by crop insurance as of February 2024. Nearly $10 billion in losses were not insured, existed outside policies’ coverage levels, or did not qualify under an existing risk management program. Drought, excessive heat, and wildfires alone accounted for over $16.59 billion in total crop losses; $3.99 billion was linked to excessive precipitation, flooding, and hurricane events; and $1.37 billion was caused by hailstorms according to the report.