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Welcome to ANR at Noon February 22, 2013

Welcome to ANR at Noon February 22, 2013. What Will Happen to Land Values with $4.50 Corn and Will We Get There ? ISUEO Economists Mike Duffy Chad Hart. Recent Corn Prices vs. Costs. Average Return on a Bushel of Iowa Corn, 1972-2011 5 cents per bushel. Corn Prices vs. Costs.

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Welcome to ANR at Noon February 22, 2013

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  1. Welcome toANR at NoonFebruary 22, 2013 What Will Happen to Land Values with $4.50 Corn and Will We Get There? ISUEO Economists Mike Duffy Chad Hart

  2. Recent Corn Prices vs. Costs

  3. Average Return on a Bushel of Iowa Corn, 1972-2011 5 cents per bushel Corn Prices vs. Costs

  4. Corn Prices vs. Costs

  5. Projected Corn Supply & Use Source: USDA

  6. Projected Corn Prices vs. Costs Based on those USDA projections

  7. How Did We Get Below $4.50 Last Time?

  8. Land Prices at $4.50 • There is a strong correlation between land sales prices and price but it is not less than 70% • There are other factors that influence price; one of the major ones is the prevailing attitude. A major drop in corn prices may have a greater impact than just the percentage drop would indicate.

  9. Land Prices at $4.50 • The correlation coefficient between land sales price and profit has averaged 60% between 2005 and 2012. • If these relations hold and a 25% decrease in price led to a 25% decrease in profits then land values should drop 15% or $1,260 an acre • But,

  10. Land Prices at $4.50 • Drop in commodity prices not exactly proportional to drop in profits • Drop in commodity prices will have psychological impacts that could exasperate the decreases • Land values will drop but it will be more like a tire with a nail than a bubble bursting • Predicting how much they will drop is an inexact art

  11. Thank you for joining us today We invite your feedback and suggestions for future ANR @ Noon webinars: John Lawrence – jdlaw@iastate.edu Chris Mondak- cmondak@iastate.edu Next date: March 29, 2013

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