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Agenda

Agenda. Trends in Farmland Values Trends in Farmland Leasing Trends Share Leases Exist Farm Leasing Relationships Determining a "Fair" Cash Rental Rate Flexible Cash Leases. Tools. ISU Extension Staff Resources Ag Decision Maker Decision Aids Annual Surveys Publications Decision Tools

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Agenda

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  1. Agenda Trends in Farmland Values Trends in Farmland Leasing Trends Share Leases Exist Farm Leasing Relationships Determining a "Fair" Cash Rental Rate Flexible Cash Leases

  2. Tools • ISU Extension Staff Resources • Ag Decision Maker • Decision Aids • Annual Surveys • Publications • Decision Tools • Agricultural Management e-School • Farm Leasing Arrangements course • Non ISUE resources • SoilView

  3. December 2008 Corn Futures

  4. December 2009 Corn Futures

  5. November 2008 Soybean Futures

  6. November 2009 Soybeans

  7. U.S. Ethanol Industry • Current ethanol capacity: 141 plants, 8 billion gallons/year • Total capacity under construction and expansion: 5.4 billion gallons/year • 59 new ethanol plants and 7 expansion projects underway • 2.1 billion bushels of corn were used in producing fuel ethanol in 2006/2007 marketing year. • 3.2-3.5 billion bushels of corn are expected to be used in producing fuel ethanol for 2007/2008 marketing year.

  8. http://www.dtnethanolcenter.com/images/e0010039/ethanol_plants.htmlhttp://www.dtnethanolcenter.com/images/e0010039/ethanol_plants.html

  9. +1 +24 +18 -79 -10

  10. U.S. Biodiesel Industry • Current biodiesel capacity: 171 plants, 2.24 billion gallons/year • Total capacity under construction and expansion: 1.23 billion gallons/year • 60 new plants underway • 2.8 billion pounds of soybean oil was used in producing biodiesel in 2006/2007 marketing year. • 3.8 billion pounds of soybean oil are expected to be used in producing biodiesel for 2007/2008 marketing year.

  11. www.extension.iastate.edu/agdm

  12. Iowa Farmland Value Surveys • Iowa State University Extension • conducted annually around November 1st • mailed survey sent to 1,100 licensed real estate brokers • usually 500-600 responses • released in mid-December • Federal Reserve Bank of Chicago • quarterly survey of ag lenders by state • http://www.chicagofed.org/economic_research_and_data/ag_letter.cfm • Realtors Land Institute • semi-annual survey (March and September) • compares land classification by corn production • includes pasture and timber land • http://www.centralstatesland.com/csmlsdisplay.asp?id=ed01

  13. Recent Land Value Estimates • Chicago Fed 17% increase April to April • RLI 9.5% increase September to March

  14. Average Values All Grades 1950-2007

  15. Percentage Changes Percentage Change Increased up to 20% Increased 20.1 to 22.5% Increased 22.6 to 25.0% Increased 25.1% or more

  16. Percentage Change Adjusted for Inflation, 2007 Dollars

  17. Positive Factors Affecting Land Values, 2003-2007

  18. Who Purchased Farmland

  19. Change in Sales Activity

  20. .29 .18

  21. Crop Share 50-50 Lease Landlord Tenant Labor ½ inputs Machinery Management Land ½ inputs ½ income ½ income

  22. Crop Share 50-50 Lease Corn Landlord Tenant Land $305 ½ inputs $199 Labor $ 29 ½ inputs $199 Machinery $107 Management $169 ½ income $504 ½ income $504

  23. Crop Share 50-50 Lease Soybeans Landlord Tenant Land $192 ½ inputs $114 Labor $ 27 ½ inputs $114 Machinery $ 79 Management $ 85 ½ income $305 ½ income $305

  24. Corn $73.50 Seed $97.20 Nitrogen $71.40 Phosphate $39.60 Potash Soybeans $37.20 Seed $45.90 Phosphate $61.20 Potash Increased Costs of Production

  25. Power Mach Cost vs Invest. Cost(Per Acre) Low $96 Mid $76 High $72

  26. Machinery costs Fixed costs Variable costs Depreciation Interest Storage Insurance Repairs Labor Fuel

  27. Leasing Video • 3 Interviews - 15 minutes (:24 - :38) • Young farmer • Established farmer • Father-Son farming operation

  28. Putting a Lease Together • Determine the goals for each party • production with the highest potential return • fair return to each party • continuity of income year to year • minimize risk • improve communication skills • Put the agreement in writing - • Both parties should be accountable to the lease arrangements established

  29. Improving Negotiation Skills • Focus on win-win situations • Introduce funny money • Don’t underestimate your position at the bargaining table • Formulate a resistance point

  30. Leasing Opportunity Soil Type: Acres: Percent: CSR ---------- -------- -------- ----- T370B 61.47 23.2% 85 248 17.72 6.7% 60 T368 16.70 6.3% 90 212 11.71 4.4% 91 T369 87.78 33.1% 85 133 9.69 3.7% 80 220 60.11 22.7% 85 ---------- -------- -------- ----- Totals 265.19 100.0% 83.73 Iowa Corn Suitability Rating based yield estimation: 179 bushels per acre

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