Kelvin Leibold ISU Farm Management Field Specialist kleibold@iastate.edu 641-648-4850

2. Kelvin Leibold ISU Farm Management Field Specialist kleibold@iastate.edu 641-648-4850

3. Iowa Land Value Survey 2004 Dr. Michael Duffy, Extension Economist Darnell Smith, Research Associate

4. Statewide Average

5. High Grade Land

6. Medium Grade Land

7. Low Grade Land

8. Northwest

9. North Central

10. Northeast

11. West Central

12. Central

13. East Central

14. Southwest

15. South Central

16. Southeast

17. 2004 Average Values

18. Average Value - All Grades(Nominal Dollars)

19. Average Value - All Grades(1982-84 Dollars)

20. Percentage Changes

21. Percentage Change(Nominal Dollars)

22. Percentage Change(1982-84 Dollars)

23. 2004 Land Buyers

24. Land Buyers - 1989 - 2004

25. 2004 Sales Activity

26. Sales Activity - 1987-2004

27. Positive Factors

28. Negative Factors

30. Conclusions Iowa farmland owners are aging and the trend will continue for the next several years. There will be a considerable amount of Iowa’s farmland change hands over the next few years. More than likely this land will be passed on to the next generation and not even enter the market. There will continue to be an increase in the amount of land owned by people outside the state.

31. Conclusions Land ownership patterns will change with fewer sole owners and more multiple owners More land will be rented and cash rents will become more prevalent Second generation may have different views towards land

32. Conclusions • Less debt against the land • Different category of purchasers • Fewer land sale contracts • Factors to watch: • Government programs • Interest rates • Exchange rates • Deficit

34. Farmland Leasing Overview

35. Presentation Components Farmland Leasing Trends and Emerging Issues Rental rates Calculating rental rates Impact of risk management tools Summary of ISU Extension Resources

36. Leasing Trends • Increase in cash rent vs. crop share leases • 40% of Iowa farmland is cash rented • versus 21% in 1982 • 18% of Iowa farmland is crop share • versus 21% in 1982 • 41 % of Iowa farmland is owner operated • versus 55% in 1982

37. Trends for Farmland Ownership and Leasing Landowners not living on farmland are more likely to lease their land. Individuals 65 years and older account for 62% of the ownership of leased farmland. Females own over half of leased farmland. Non-residents of Iowa own about 20% of all farmland. Professional farm managers assist on 9% of leased farmland (over ½ is cash rented).

38. How is farmland operated?

39. Percent of Iowa Farmland Acres by Tenure and Year

40. Returns to Owner for Crop-Share and Cash Leases – Corn, Average Iowa Values

41. Determining A “Fair” Cash Rent Value

42. Supporting Information on this 80 Acre Farm Location: Boone County Tillable Acres: 75 Acres Corn Yield: 160 bu/Acre Soybean Yield: 45 bu/A Corn Suitability Rating: 80 CSR

43. Calculating Cash Rent Values • Cash Rent Market Approach • ISU Extension Publication FM 1851 – Cash Rental Rates for Iowa 2005 Survey (released in May) • Three Methods for Determining Cash Rent Values • Typical Cash Rent • Average Rent for Production • Average Rent for Corn Suitability Rating (CSR)

44. Calculating Cash Rent • Typical Cash Rent • Select the Area of the State/County • Area 7 County Boone • Determine Overall average $ 140 /A • High Quality Third = $ 156 /A • Middle Quality Third = $ 141 /A • Low Quality Third = $ 122 /A

45. Calculating Cash Rent • 2 a. Average Rents Per Unit – Corn Yield • Select the Area of the State/County • Determine Average Rent for Corn • Farm’s Average Corn Yield (bu/A) 161 • Times rent per bushel of Corn yield .88 • Equals the Average Rent for Corn Acres $ 142/A

46. Calculating Cash Rent • 2 b. Average Rents Per Unit – Soybean Yield • Select the Area of the State/County • Determine Average Rent for Soybeans • Farm’s Average Soybean Yield (bu/A) 45 • Times rent per bushel of Soybean yield 3.16 • Equals the Average Rent for Soybean Acres $142/A

47. Calculating Cash Rent • Average Rents Per Unit – Corn & Soybeans • Add the Average Rent for Both • Corn Average Rent $ 142/A • Soybean Average Rent $ 142/A • = Total Rent $ 284 • Divided by 2 • Average Rent Corn & Soybeans • $ 142 /A

48. Using Corn Suitability Rating (CSR) • Average Rents Per CSR Index Point • Select the Area of the State/County • Determine the Average Cash Rent using CSR • Farm’s Average Corn Suitability Rating 80 • Times rent per CSR index point $1.75 • Equals the Average Rent for all Row Crop Acres $ 140 / A Source: ISU Extension Publication FM- 1851

49. Overall Average • Average all 3 Methods • Method 1: Typical Cash Rent $140 /A • Method 2: Average Rents per Unit $142 /A • Method 3: Average Rents per • CSR Index Point $140 /A • Total all Methods and divide by 3 $140 /A • $140 /A X 75 Tillable Acres = $10,500 • Split Payments of $5,250 and $5,250 Source: ISU Extension Publication FM- 1851

50. Crop Lease Comparison Gross Income Method Tenant Residual Method Market Productivity Method Crop Share Method Return on Investment Method • Assumptions:75 crop acres, 160 bushel corn yield, 45 bushel Soybean yield, • Corn Market Price $2.20 / bu, Soybean Market Price $5.25 / bu, • Direct Government Payments average $22.00 / acre