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Navigate the Land Market on the New Peoples Company Website

Peoples Company has revamped its online presence with the unveiling of a new, easy-to-navigate website that reflects our straight-forward approach to providing buyers, landowners and land investors with modern tools to help navigate today’s land market.

The re-launch of www.PeoplesCompany.com focuses on our core business of land brokerage, land Peoples Website Homepageauctions, land management and land investing, and coincides with our commitment to the employing the most innovative marketing practices in digital media and social networking.

The new website also features mobile-responsive design, optimizing the view and functionality for those surfing the Internet on tablets or smartphones.

Our real time communication efforts regarding news in the land industry include the publication of all new Peoples Company land listings, auction results and recent sales reported daily on Peoples Company’s social media sites. Since the beginning of March, Peoples Company has shared more than 50 Facebook status updates, dozens of Twitter posts and nearly a dozen blogs on everything from land values to cash rents and commodity prices, as well as the announcement of a new Peoples Company land agent and guest post covering the impact of CSR2 on land values.

Please take a moment to explore the new site, where you can also find easy access to our newsletters, agent bios and contact information, and a portal to sign up for monthly e-mail updates. 

Thank you for considering Peoples Company as your ag real estate company of choice. As always, we invite you to find, follow and otherwise interact with us on Facebook, Twitter and LinkedIn – streaming with our latest land listings, information about upcoming events, and access to breaking news.

Posted in Headlines, In The News, Land Investing, Land Management, Social Media | Tagged , , , , | Leave a comment

Corn, Credit and Land Values

During the past year, agricultural publications, websites and seminars have warned about an inevitable downturn in commodity prices and the impact on land values when a drop in net farm income is realized. As 2013 unfolded and land value surveys were published, they all reflected a significant deceleration from the rapid increase in land values that had been realized during the previous three years.

Each successive report showed value increases getting smaller and smaller to the point of calling the land market flat. The latest report published last week by the Iowa Realtors Land Institute showed a -5.4 percent average state wide decline (Sep 13-Mar 14) and an annual decline of -4.2 percent (Apr 13-Mar 14).

 

Farmland Values

Anecdotal observations support these published reports. As corn prices continued to slide throughout 2013, land sale results became more variable. The days of each successive sale setting a record came to an end. As corn prices traded in the low $4 range, buyer caution took hold with many sales having fewer and less aggressive bidders. In some cases, seller expectations were unmet and for the first time in several years “no sales” were happening. However, this has not been a consistent trend and many farms continue to sell in the upper ranges. And as corn prices have rebounded to $5, we have observed a corresponding rebound in buyer willingness to aggressively pursue good quality land that fits well into their operation.

A recent blog post by Andrew Zellmer published on this website summarized the magnitude of the drop in crop insurance guaranteed income between 2013 and 2014, and how that drop in income – if maintained over an extended period – could negatively impact farmland values. Scroll to that blog post to see how the drop in corn price from $5.65 in 2013 to $4.62 for 2014 could potentially impact land prices.

Bankers report drops in many of their customers’ net worth and working capital, due to 2012 crop inventory being sold at lower prices and the 2013 inventory being significantly below last year’s value. In addition, farmers are having a difficult time projecting net income levels that leave their bankers with a positive outlook. The following chart, “Beware of the Expense Tail” (Farrell Growth Group, LLC) sums up where many farmers find themselves going into 2014; in the “Lower/No Profits” zone.

 

Expense Trail

This part of the cycle will have significantly different impacts on farmers based on their financial position going into this phase, and how long it last. Two of the primary factors of comparison between the end of the land bull market in 1983 and today are 1) the leverage level of the farm sector and 2) the reaction to the changing economics by the farmers and their bankers. Today the farm sector as a whole has a debt-to-asset ratio of 10 percent, just half the leverage as in 1984.

However, the debt is more highly concentrated with 15 percent of the highest leveraged farms presently holding 50 percent of the total farm debt versus holding 30 percent in 1984. This means that 85 percent of farmers are in a position with little or no debt and able to not only handle a down cycle in net farm income, but will find opportunities during this period.  The 15 percent of highly leveraged farmers will have a difficult time adjusting. In fact, many are already under significant pressure.

During the past year there have been many articles about the “Wealth Effect” and how the response of farmers, and their bankers, to the Wealth Effect will be a major determinant in whether land values make a reasonable market adjustment or crash. Follow this link for a detailed reading about “The Wealth Effect in U.S. Agriculture” as published by the Federal Reserve Bank of Kansas City.

The Wealth Effect is created during prosperous periods with rising asset values, especially land. During these times, farmers spend more freely including more aggressively on capital items. When revenue declines the “wealth effect” leads farmers to borrow against their higher asset values to maintain this higher level of spending. This phenomenon is considered a significant factor in the farmland value collapse of the 1980s. So today, as farmers enter the “Lower/No Profits” phase, are they going to step up borrowing to maintain a higher level of spending?

Based on many recent conversations with farmers and bankers my conclusion is that both are being conservative and we are not experiencing “Wealth Effect” borrowing to any significant degree. I’m looking forward to seeing some additional Federal Reserve credit condition reports for verification. During the past two months, I have had several contacts from farmers wanting to sell land and lease it back as a method for shoring up their working capital position. This bit of anecdotal evidence leads me to believe fundamental adjustments are going to be made rather than simply borrowing against higher valued assets. This is a healthy sign and supportive of a stable/moderate adjusting land market versus a burst of today’s values.

The second half of 2013 and the beginning of 2014 have seen a stall in the farmland market price increases. It’s a “yellow light” situation. And I’m observing farmer’s reactions similar to any yellow light situation: some apply the brakes, some take their foot off the gas and coast through and others keep their foot on the gas and ignore it. I believe the long-term fundamentals for farmland ownership remain very strong.

Farmland that’s a good fit, meets your investment parameters and is part of a long-term strategy remains one of the best investments available.

Ron Beach is part of the Land Investment Programs division at Peoples Company where he works with farmers wanting a source of capital to purchase land they can then lease and with numerous capital sources wanting to invest in farmland. Ron may be reached at (712) 579-2587 or Ron@PeoplesCompany.com.

Posted in Crop Insurance, Headlines, In The News, Land Investing, Land Values | Tagged , , , , , | Leave a comment

CSR2 and Ag Use Adjustments: Impact in Polk County, Iowa

The new CSR2 rating program is intended to calculate a Corn Suitability Rating with more simplicity, consistency and clarity. Ag professionals have long relied on the original program to help negotiate cash rents, put a value on a parcel of farmland or other day-to-day activities. The following guest post by Polk County Chief Deputy Assessor Randy Ripperger explores the conversion of the CSR2 rating system and implementation of state-mandated adjustments for non-cropland.

The Polk County Assessor revalued all agricultural classed property for the 2014 assessment. This revaluation was the result of two changes in the assessment formula:  1) implementing the new CSR2 soil rating system and 2) using the new formula for making adjustments to the productivity values of certain agricultural lands as mandated by changes in the Iowa Administrative Code 701-71.3.

History

In Iowa, assessments on agricultural property are based on the productivity and net earning capacity of the property.  Assessors use the results of a modern soil survey in conjunction with the Corn Suitability Rating (CSR) system to spread the valuation among individual parcels of such agricultural property. The CSR system was first introduced in 1971 as a soil productivity rating system designed for equitable taxation. As a result of advances in soil science, CSR2 was released in 2013. The new CSR2 system is similar to the original CSR system, but has some differences. CSR2 primarily uses more of a data-driven model as compared to the original CSR system which used a judgment and experience-based system.

The Agricultural Adjustment Committee was formed in 2011 at the direction of Governor Terry Branstad, and consisted of representatives from across the state. Its purpose was to review practices for making adjustments to the assessed productivity values of certain agricultural lands to provide more consistency statewide for the assessments of  non-tillable lands. The Ag Adjustment Committee came about because of a growing public awareness that some county assessors were making adjustments to various non-tillable lands, while others did not. Committee members made a recommendation that was enacted by the Iowa legislature in July of last year (see Iowa Administrative Code 701-71.3).

The new rule requires assessors to adjust non-cropland acres and also requires assessors to implement the adjustments for their entire jurisdiction by the 2017 assessment, or the 2019 assessment in the case of a hardship. Some counties, including Polk, implemented this new adjustment formula for 2014.

Impact in Polk County

CSR 2 ImpactThe change in the total aggregate rating points across Polk County from CSR to CSR2 increased slightly, about +0.36%.  This is comparable to the statewide average, which was +0.3%. The mean average change in the total rating points per parcel was +0.32%, while median average change was +0.93%. These numbers would directly correspond to changes in the assessed value attributable to implementing the new CSR2 rating system. The chart to the left shows the relation between the two rating systems, with the points representing the total CSR and CSR2 rating points for each parcel in Polk County.

Polk County was one of 44 counties in the state that developed adjustments for land use prior to the 2014 assessment; 50 counties did not. These adjustments, in general, were more generous than the newly mandated adjustment scheme and will no longer be used. Under the new system, adjustments will be made for any non-cropland with a CSR2 that is greater than 50 percent of the average CSR2 for cropland in the county. And the adjustment will be based upon the five-year average difference in cash rent between non-irrigated cropland and pasture as published by the National Agricultural Statistics Service. Here’s an example of the calculation for Polk County.

 

Average county CSR2 rating for cropland: 82 CSR2

50% of average cropland CSR2: 41 CSR2

Example of non-cropland soil 11b CSR2 rating: 79 CSR2

Non-cropland CSR2 points to be adjusted: 79 − 41 = 38 points

5-year average rent for non-irrigated cropland: $183.60

5-year average rent for pasture land: $39.10

Percent difference (rounded): $39.1/$183.60 = 21%

Percent difference times points to be adjusted: 38 points * 21% = 7.98 adjusted points

Adjusted CSR2 non-cropland: 41 + 7.98 = 48.98 adjusted CSR2 points

There are four categories of land use: cropland, building lot, non-cropland, and water; adjustments are made for building lot, non-cropland, and water uses.

Implementing both the CSR2 rating system and the new adjustment formula, the total aggregate adjusted rating points across theCSR 2 Impact county increased by 5.5%. The mean average change in the total adjusted rating points per parcel was +11.0%, while median average change was +3.5%. The chart on the right shows the relation between the CSR/old adjustment scheme and the CSR2/new adjustment scheme on a parcel basis.

These changes correspond directly to changes in the assessed value attributable to both changes. However, in order to keep the same productivity value per acre as the five-year study conducted for the 2013 assessment ($1,629.14), the dollar per CSR point had to be adjusted from $20.88 per point down to $19.71 per point. In the end, of the 5,715 ag parcels in Polk County, 2,226 saw a land value increase, 3,228 saw a land value decrease, and 261 saw no change. The median percent change was -2.3%.

Single Parcel Comparison

A new feature on the Polk County Assessor’s website launched at the end of March shows actual calculations, including land use adjustments, made for the 2014 agricultural land value. It’s much more detailed than the information that was previously on the site and includes:

  • A soil map of the property
  • A CSR use summary (broken down by crop land and non-crop land)
  • A breakdown by CSR soils

You can also review how the land was valued last year using the CSR rating system with the “old” adjustments by clicking on the “2013 CSR Report” link located above the soil map.

Any questions, you can call (515) 286-3014, fax (515) 286-3386, or email polkweb@assess.co.polk.ia.us.

Randy Ripperger
Chief Deputy Assessor
Polk County, Iowa

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Peoples Company Welcomes The Dirt Dealer Jeffrey T. Obrecht

Peoples Company is preparing to set new milestones in 2014 with the addition of land agent and auctioneer Jeffrey T. Obrecht to our team of real estate professionals serving landowners and investors in the heart of ag country.

Jeffrey T. Obrecht

Jeffrey T. Obrecht, The Dirt Dealer.

For nearly 40 years, Jeffrey has partnered with landowners to list and sell tens of thousands of acres of productive Midwest farmland, and is a licensed real estate broker associate in Iowa, Minnesota, Nebraska and South Dakota – states in which Peoples Company already holds real estate brokerage licenses.

With a magnitude of hands-on experiences that’s captured the attention of major television networks and financial publications covering the ag boom in the United States and abroad, The Dirt Dealer has handled more than $250 million worth of ag real estate transactions in the past seven years alone. The Realtors Land Institute also named Jeffrey as Iowa’s top land agent in 2011 and 2012, based on volume of transactions and number of acres sold.

The level of energy and excitement surrounding Peoples Company’s land auctions, investment-related educational opportunities, and annual Land Investment Expo has achieved new heights in recent years as farmland values skyrocketed to record levels in Midwest hot spots.

Combined with Peoples Company’s innovative approach to marketing and use of social media to make near-real-time connections with tech-savvy audiences on the web and mobile devices, adding someone of Jeffrey’s caliber to an already outstanding team of land professionals broadens our reach and reinforces our “everything starts with land” approach to uncovering opportunities for clients in eight Midwest states.

It also strengthens the position of Peoples Company as one of the leading land brokerage firms in Iowa in terms of total market share.

Please join us me in welcoming to Peoples Company Jeffrey T. Obrecht, The Dirt Dealer, and find more information about upcoming land auctions, events and land investment opportunities at www.PeoplesCompany.com.

Learn more about Jeffrey on LinkedIn and follow him on Twitter at www.Twitter.com/TheDirtDealer.

Posted in Headlines, In The News, Land Auctions, Land Investing | Tagged , , , , , , , | Leave a comment

Land Investment Monthly – March 2014

 

The Land Investment Monthly is a round-up of articles and headlines published by the farm press, business media and financial publications with insights into buying, selling or investing in farmland, recreational ground or development ground. Follow Steve Bruere @SBruere on Twitter and find Peoples Company on Facebook for the latest land listings, auction results, upcoming events and real estate news. To subscribe to my monthly updates via email, send a message to Steve@PeoplesCompany.com with “Land Investment Monthly” in the subject line.

Aerial Farmland ViewIowa Stine
Harry Stine, the richest man in Iowa with around 15,000 acres of farmland under his belt, developed some of the most valuable agricultural products on earth here. An upcoming article in Forbes magazine profiles the billionaire seed pioneer and his drive for innovation and efficiency in the “global epicenter” America’s heartland. Read more.

Ukrainian Corn Belt
Could a future Ukrainian corn belt rival the United States? Soil and climate conditions in the politically charged region resemble those found in the Dakotas. The adoption of Western farming practices and interest by major companies are driving growth in Ukraine. Agriculture already represents 10 percent of the nation’s economy and corn production has grown by nearly 17 percent a year since 2008. Read more.

Farm Banks Prosper
Ag lenders prospered last year with 277 Iowa-based banks accounting for 7 percent more farmland loans in 2013. The American Banking Association’s Don Foley cites potential for “tremendous equity,” as reported by the Des Moines Register in an article on the impact of rising land values and opportunities for farmers to prepare for the years ahead. Read more.

Working Capital
Farmland owners are well positioned to withstand a dip in farmland values, according to a USDA report covering the perspective of Purdue University ag economist Jason Henderson. Speaking last month during the USDA’s Agricultural Outlook Forum, Henderson said in the absence of overleveraging the farm he expects liquidity and working capital to help landowners overcome any type of “speed bump” over the next two years. Read more.

Cover Crops
Finding a bargain on farmland may sound to good to be true for some investors given reports of ag real estate selling at auction for $10,000, $15,000 even $20,000 an acre in recent years. Agriculture.com’s Gene Johnson reports on the power of seeking out good investments close to home and in other states with an expectation that the return on investment from crop production could cover the annual debt service on a loan. Read more.

Minnesota High
An applied economist with the University of Minnesota says the state has yet to see a downturn in land values with a new land survey pointing at an increase of 5 percent to an average of $5,071 per acre compared with the year-earlier period. That represents the largest jump in history of the study. Read more.

The Long View
An agricultural commodity boom has driven food prices up 100 percent since 2003. That’s among the reasons why legendary investors such as Jim Rogers consider farmland as the most stable of long-term real estate investments. This CNBC article digs into an investment fund that buys prime agricultural land and leases it back to local farmers, as well as a look at increasing production in Brazil, Africa, Bulgaria and developing nations around the world. Read more.

Farmland Film
A new agricultural documentary set to premiere this spring focuses in the lives of six young farmers and ranchers making their way as the next generation of Americans to enter the high-risk, high-reward industry of feeding the world. A fifth-generation Nebraska corn-and-soybean farmer and a man carrying on the work of his family’s hog farming operation in Minnesota are among those featured in “Farmland,” which is scheduled to open May 1 in 60 major markets. Read more.

Managing Rent
Expectations of lower profitability are changing the game for cash rents going into 2014, as owners and operators assess the toll of slumping commodity prices and how it relates to their land. Peoples Company Land Agent Matt Adams explores how those looking at increasing a farm’s fertility or making adjustments for commodity prices may consider the role of a professional farm manager. Read more.

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Iowa Ag and EPA’s Proposed Clean Water Act Rule

 

On March 25, the U.S. Environmental Protection Agency and the Army Corps of Engineers issued a proposed joint rule to clarify the types of waters that are – and are not – covered by the Clean Water Act. The initiative is supposed “to bring certainty and predictability” to agriculture. For several years, however, the EPA’s efforts have moved toward control of ALL land that carries water, not just land that meets the definition of “navigable” waters. The definition of “navigable” is as follows: Waters that provide a channel for commerce and transportation of people and goods.

EPA Proposed Clean Water Act Rule

In the United States, jurisdiction over navigable waters belongs to the federal government, rather than to states or municipalities.  This regulation allows the government to determine how waters are used, by whom, and under what conditions. The EPA’s draft rule defines “waters of the United States” as “traditional navigable waters; interstate waters, including interstate wetlands; the territorial seas; impoundments of traditional navigable waters, interstate waters, including interstate wetlands, the territorial seas, and tributaries, as defined, of such waters; tributaries, as defined, of traditional navigable waters, interstate waters, or the territorial seas; and adjacent waters, including adjacent wetlands.”

The draft rule greatly expands the definition of lands that will be brought under the Clean Water Act’s regulation, and the EPA’s efforts have and continue to generate concern over ownership and control of waters, waterways and wetland areas that have until now been held in private hands. The question arises as to whether waterways in crop fields, intermittent streams, those with only seasonal flow, wetlands, and other areas associated with runoff water will be controlled by EPA.

What this truly means for agriculture in the state of Iowa is yet to be determined. But it is evident that should the EPA have control over the use and conditions of those lands, a firestorm of unrest will occur, directly the opposite of the intent of bringing certainty and predictability to agriculture.

The proposed regulation was released with a 90-day comment period, as well as a Memorandum of Understanding regarding implementation of an exemption from permitting under certain agricultural conservation practices was released. This interpretive rule – developed with assistance from the EPA, the Corps of Engineers and USDA/NRCS – provides guidance as to which conservation practices are exempt from the 370-page regulation, which provides definitions and an explanation of the changes being offered.

Stay tuned for a heated battle and, in the meantime, take a few minutes to visit the EPA website at http://www2.epa.gov/uswaters and watch for instructions on how to submit comments. There has already been comments by at least one legislator who said this maybe “the largest land grab in the history of the United States.”

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Planning the Future for Lower Quality Farmland

 

Working with many landowners and farm operators throughout Southern Iowa, what is always in question is the long-term sustainability and productivity of marginal farmland.

Iowa FarmThe spike in commodity prices in the past four years prompted many landowners to convert pasture and CRP acres alike into row crop. Farmers profited from all-time high corn prices and landowners have benefited from higher cash rents. According to the USDA’s release of long-term crop projections, corn and soybean prices are not going to be what we have become accustomed to over the past few years, and future cash rents have no choice but to follow the trends of commodity prices.

Profit margins have tightened across all farming operations with lower quality farmland being hit the hardest. What does the future hold for lower quality farmland in Iowa and throughout the Midwest?

Those who are interested in buying or selling in the near future should be especially interested in this topic.  None of the following information is ground breaking by any means, but the purpose is for landowners to take a step back and evaluate the operation as a whole and make sound decisions moving forward. There are still several unanswered questions leering about crop insurance and conservation compliance. Staying within the boundaries of regulations and on top of recent changes will be increasingly important.

The cost of production paired with lower yields and lower commodity prices have many landowners facing a tough decision for the future use of lower quality land. No matter the source of income (i.e. cash rent, CRP, pasture rent, et cetera), farm buyers and investors are most interested in the longevity of the investment and how to maximize profits on a long term basis.

Finding the farmer who will pay the highest rent may not be the best approach. A sure fire way to increase the value of your asset is to be able to prove sustainable income. Land will always be a great investment, but it is important to protect this asset the same as you would any other, and this can only be done with proper planning.

Consider a quote from T. Boone Pickens at the 2014 Land Investment Expo: “A fool with a plan can beat a genius with no plan.” Planning and preparation is the key to a solid balance sheet. It will become increasingly important for landowners to get creative and to evaluate each field and each acre individually. Working with local NRCS offices to create a conservation plan should be the first step. This will become increasingly important due to the new farm bill linking basic conservation practices to crop insurance premium subsidies for highly erodible land and wetlands often associated with lower quality farmland.

By working with NRCS, landowners can develop and carry out a plan that will achieve the goals of protecting not only the environment, but your asset.  It is important to consider the needs and capabilities of each acre within the plan. No matter what you decide is the best practice to follow, a plan will help give you a clear picture moving forward, allowing you to prepare for the years ahead.

For some, CRP may once again be an appealing option. The long-term goal of the program is to reestablish valuable land cover to help improve water quality, prevent soil erosion, and reduce loss of wildlife habitat.  With the volatility of cash rents across the Midwest and the uncertainty that future cash rents will remain strong, CRP can provide a long-term, guaranteed payment, providing a clear picture and income stream for some of the marginal type farmland found in Southern Iowa among other places across the Corn Belt.  Southern Iowa landowners have been very creative in creating multiple sources of income via alternative options such as CRP and hunting leases.

Diversification is the key to hedging against fluctuating markets. One market currently on the move is the cattle industry. The long-term forecast estimates an increase in profit due to lower feed cost and increase demand for beef worldwide. Many cattle operations are looking to grow their herd. With the past years’ tilling of pasture and an overall shortage of grassland, pasture will be in high demand.

Moving forward it will take a multi-prong attack to maximize profits on mixed use lower quality cropland. Landowners will need to be creative and explore alternative methods of income. Working with government agencies to create a plan to optimize every acre individually will be the key to success as we come full circle.  Peoples Company can assist in creating a plan geared toward maximizing sustainable profits or prepping the farm for future sale.

Please contact me for additional information at Kenny@PeoplesCompany.com or call (515) 783-8718.

Posted in Cash Rents, Crop Insurance, Headlines, In The News, Land Management, Natural Lands | Tagged , , , , , , , , , | Leave a comment

Bloom off the Rose for Cash Rents?

 

Expectations of lower profitability are changing the game for cash rents going into 2014, as owners and operators assess the toll of slumping commodity prices and how it relates to their land.

Farm Lease AgreementThough cash rents across Iowa have for the most part remained unchanged over the past year, they certainly aren’t skyrocketing and stakeholders are operating in a whole new business environment heading into spring. The prices of corn and soybeans – and uncertainty surrounding the weather – also weigh heavily on the mind.

Examples of deep discounts or leases not panning out appear to be constrained to areas in which highly aggressive leases intersect with less-productive farmland, or related to out-of-state farm operators with weaker ties to the local ag community. At the same time, some operators who prior to a decline in corn prices were confident in the terms of existing rental agreements may now be less certain in their ability to pay.

“Cash rents are likely to be too low during periods of rising prices and high yields and too high during periods of declining prices and low yields,” according to Iowa State University economist William Edwards as reported in February by Farm Progress. “Rates often reflect the results of the past few years more than the upcoming year.”

In some cases, an operator’s need to renegotiate a lease agreement or find an alternative option reflects not only the outlook on yields or crop prices but also the fact that banks hold the purse on whether they will extend credit to an organization.

One less-than-desirable option for an owner whose tenant may be pulling back from – or can no longer afford – his or her rent may be to discount the rate or find another to take over the lease, probably at a lower amount. Owners can also custom farm their assets, but that can prove costly and expose you to all the risks involved with planting, harvesting and marketing 100 percent of the crop.

A better plan may be to work with a professional in developing a flex lease provision that allows landlords and tenants to share in the potential upside for a farm. Those types of deals also drive interest in establishing mutually beneficial relationships with farm operators while considering what that sustainable, long-term cash rent number on a piece of income-producing land needs to be.

Overall, the current outlook in terms of cash rents and the price of commodities is increasing the need for farm managers to police leases and manage farms effectively to limit risk and maximize productivity.

The thought of the rent not showing up on March 1, 2014, may have ever entered the mind of sellers who didn’t need a farm manager last year because lease terms may have been set in an overly aggressive market with high profitability and what felt like minimal downside risk at the time

As fewer aggressive farmers are perhaps willing to pay top dollar for cash rents, owners looking at increasing a farm’s fertility or making adjustments for commodity prices may be thinking about how the role of a professional farm manager in terms of interviewing quality tenants, negotiating leases and building landlord/tenant relations in 2014.

If you’re a buyer or seller interested in learning more about the land brokerage and land investment services offered by Peoples Company, email Matt@PeoplesCompany.com or call us at (855)-800-5263.

Posted in Cash Rents, Headlines, In The News, Land Management, Land Values | Tagged , , , , | Leave a comment

Q1 2014: Des Moines Metro Market Snapshot

 

Peoples Company’s Annual Builder & Developer Luncheon on February 28 was well attended by more than 250 of the Des Moines-metro area’s builders, bankers, developers and city leaders gathering for an overview of the housing economy.

My presentation on single-family housing statistics for Q1 2014 in the metro followed a talk by national economist Dr. Vince Malanga. I included an analysis of recent activity on the local level, compared with pre-recession data.

The feel of the luncheon was influenced by all the positive attention Central Iowa has received in the national press – as pointed out by Jay Byers of the Greater Des Moines Partnership – as well as the energy generated by builders coming off of a robust building and development year.

Overall, last year was a high time for the Des Moines housing market with close-to-pre-recession numbers signaling that the market has bottomed out. We did advise builders and developers to remain optimistic, yet cautious, as they start homes and develop plats in 2014 and 2015. Read more in a Des Moines Register article featuring comments and information shared by Scott Kelly and myself from the luncheon.

Des Moines Total Sold and New Construction Sold

Des Moines has certainly seen an upswing in the market for new construction and sales of existing homes, in many cases approaching peaks from the 2005 building boom with 7,706 single-family homes sold in 2013, compared with 7,935 in 2005.

By comparison, there were 1,693 new construction homes sold in 2005, compared with 1,284 in 2013.

Among the evidence of this shift back into high gear are 93 plats that were developed throughout Des Moines in 2013. That resulted in the addition of 2,301 new lots, compared with 1,283 the prior year.

Current Market Snapshot – Des Moines Metro Area

As of February 2014 As of February 2013 As of February 2012
Total Active 2,459 2,495 2,792
New Construction Active 621 475 531
Total Pending 963 1,063 945
New Construction Pending 225 257 207
Total SOLD 7,706 6,593 5,580
New Construction SOLD 1,284 1,192 998

*Sold includes single-family homes sold in calendar year.

The future for economic development activity looks bright in the Des Moines-metro area, which is experiencing a period of significant growth and has a low supply of single-family homes.

Inventories have remained relatively flat, creating demand for new homes to be built. If interest rates remain low and builders and developers don’t overbuild in the market, we should be well positioned for a robust next couple of years.

For more information on new construction lots, or access to a more complete set of local housing statistics at my disposal, email Kalen@PeoplesCompany.com or feel free to give me a call today.

- Kalen Ludwig

I am a Residential REALTOR® and Certified New Construction Sales Professional who specializes in helping homebuyers locate a suitable lot, secure a qualified builder, and pick a perfect floor plan to match their unique tastes or personal style. The ability to listen and understand the needs of her clients allows me to offer appropriate feedback and credible data that help sellers and buyers make informed decisions regarding real estate transactions. Follow me on Facebook, Twitter and LinkedIn.

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Crop Insurance Guarantees Bring Uncertainty in 2014

A major difference between the 2013 and 2014 crop years is the sharp drop in commodity prices from one to the next.

Midwest Road Side FarmPrice guarantees for US crop insurance are expected to be set at $4.62 for corn and $11.36 for soybeans. This is a major drop for both with corn being guaranteed at $5.65 in 2013, and soybeans at $12.87. The price is figured by taking the average settlement for Chicago Board of Trade for December corn futures and November soybean futures during the month of February.

The county T-Yield is an estimated county yield on a certain crop. This is used if the insured person who doesn’t have four years of production history in that county. If the insured person does have four years of production history, he or she would use Actual Production History (APH). See the example below for a farm planted to corn in Marshall County, Iowa, comparing the revenue protection per acre for a landowner in 2014, compared with the year prior.

Example 2014:
Marshall County T-Yield (180 bu.) x Level of Protection (80%) = Guarantee bu. /Acre (144 bu.)
Guarantee/Acre (144 bu.) x Price ($4.62) = Guaranteed Coverage/Acre ($665.28)

Example 2013:
Marshall County T-Yield (180 bu.) x Level of Protection (80%) = Guarantee bu. /Acre (144 bu.)
Guarantee/Acre (144 bu.) x Price ($5.65) = Guaranteed Coverage/Acre ($813.60)

That is just an example, yet shows a major decrease of $148.32 per acre in revenue protection from 2013 to 2014. A cap rate of 4 percent potentially lowers the value of the farm by up to $3,700.

Another major change that is happening is the cutting of direct payments in 2014. That was roughly $20-$25 per acre. So the $148.32 per acre in lost revenue protection plus $25 per acre of lost direct payments equals approximately $175 per acre that the farmer no longer is guaranteed for 2014. Farmers will be taking on far more risk than the previous year.

Though the last five years in farming have been profitable, 2014 could tell a different story. Many operations in past years have been raking in record profits. If the downward trend in commodity prices continues, however, lack of liquidity and inability to get financially underwritten could be major problems moving forward.

I don’t have a crystal ball as far as the future of the commodity market goes. Who knows what geopolitical or weather-related incidents will move the market throughout the 2014 crop year. Recent political unrest in the Ukraine, no second crop corn in Brazil, and heat and drought in South America has helped raise the commodity prices in the short term, yet profit margins for farmers look to be tight with high cash rents and input costs in 2014.

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