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Understanding Average Farm Real Estate Values in Colorado: Insights from 2012 Crop Insurance Workshop

In this report from the 2012 Crop Insurance Workshop held on October 30, 2012, John Deering, an Agriculture and Business Management Specialist with Colorado State University Extension, discusses average farm real estate values. Utilizing data from the USDA's National Agricultural Statistics Service, this presentation explores trends in land values and rents, providing key insights for farmers and landowners in understanding the agricultural real estate market in Colorado.

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Understanding Average Farm Real Estate Values in Colorado: Insights from 2012 Crop Insurance Workshop

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  1. Land Values/Rents

    John Deering Agriculture and Business Management Specialist Colorado State University Extension 2012 Crop Insurance Workshop October 30th, 2012
  2. Average Farm Real Estate Values Source: USDA, National Agricultural Statistics Service Inflation adjusted using GDP Chain-type deflator, 2005 = 100
  3. Why are outside investors interested? Source: USDA, National Agricultural Statistics Service, St. Louis Federal Reserve AAA = Moody’s Seasoned AA Corporate Bond Yield, 10-Year Treasury Constant Maturity
  4. Other influences on land values Recent high net returns from farming Low interest rates 1031 Exchanges Pension funds Neighbors
  5. Farm real estate and net cash income, 1990-2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service
  6. Farm real estate and net cash income, 1990-2011 Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, National Agricultural Statistics Service, Economic Research Service
  7. Farm real estate & 3 month Treasury Real estate values are inflation adjusted to 2005 by the GDP Chain-type deflator Source: USDA, Economic Research Service, St. Louis Federal Reserve
  8. Value of Non-Irrigated CroplandSecond Quarter 2012
  9. Farmland Values - Annual % Changes 2nd Quarter percentage changes from 1 year prior 2007 12.5% 2008 18.3% 2009 0.4% 2010 4.8% 2011 21.3% 2012 26.4% Source: Federal Reserve Bank of Kansas City Tenth Federal Reserve District (Quarterly Agricultural Credit Survey) CO, KS, NE, OK, WY (NM, MO)
  10. Farmland Values - Annual % Changes 2nd Quarter percentage changes from 1 year prior $1,000 in 2006 2007 12.5% 2008 18.3% 2009 0.4% 2010 4.8% 2011 21.3% 2012 26.4% $2,147 in 2012 Source: Federal Reserve Bank of Kansas City Tenth Federal Reserve District (Quarterly Agricultural Credit Survey) CO, KS, NE, OK, WY (NM, MO)
  11. Alternative Investments Year Farmland S&P 500 Apple Inc. (Adjusted) 2006 $1,000 $1,000 $1,000 2012 $2,147 $1,237 $9,898 Source: Wouldacouldashoulda
  12. Rent-to-value ratio Source: USDA, National Agricultural Statistics Service
  13. Rent-to-value % in nearby states After Property Tax Ag Rents as % of Value 1951-2010 2011 CO 5.65% 2.37% KS 5.81% 3.24 % NE 6.42% 4.20 % OK 4.46% 2.21 % WY 6.16% 1.49 % Source: Kansas State University Department of Agricultural Economics (Publication: AM-KCD-2011.18)
  14. Determining equitable lease rates Percentage of land value Lately a volatile proposition Fixed cash rent Shifts risk to tenant, easier for absentee landlords Crop share rent Increasingly hard on tenants with changes in technology & higher input costs Fixed cash rent floor with “bonus” tied to price & yield Allows landlord to participate in some upside & lowers downside risk for tenant
  15. CSU ABM Lease Templates &Enterprise Budgets Crop Share Lease Agreements Fixed Cash Crop Lease Agreements Flexible Cash Crop Lease Agreements Leasing Arrangements for Cattle Pasture Leases Estimating Rental Rates of Crop Land for Landowners & Tenants (Excel Workbook) CSU Crop Enterprise Budgets (Corn, Alfalfa, Wheat, Sunflowers, Sugarbeets, Millet, Pinto Beans, etc.) http://www.coopext.colostate.edu/ABM/cropbudgets.htm
  16. CSU ABM Excel Template
  17. Estimating Rental Rates
  18. Estimating Rental Rates
  19. Land value & rent data resources County assessor offices & webpages (Sale data) http://www.qpublic.net/co/ Alamosa, Cheyenne, Conejos, Crowley, Custer, Dolores, Fremont, Gunnison, Kit Carson, Las Animas, Lincoln, Mineral, Saguache, San Juan, Sedgwick, Washington, Yuma USDA/NASS Surveys (Rent survey, county level) CSU ABM Custom Rates Survey (Rent survey, region) http://www.coopext.colostate.edu/ABM/custrates.htm
  20. Sources Nickerson, C., M. Morehart, T. Kuethe, J. Beckman, J. Ifft, and R. Williams (2012) “Trends in U.S. Farmland Values and Ownership” EIB 92 Economic Research Service Kansas State University Department of Agricultural Economics (Publication: AM-KCD-2011.18) Federal Reserve Bank of Kansas City – Tenth Federal Reserve District (Quarterly Agricultural Credit Survey)
  21. Questions? John Deering 970-345-2287 john.deering@colostate.edu Lease Arrangement Resources: http://www.coopext.colostate.edu/ABM/investment.htm
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