Kenton Springer, Farmers National

1. Trends and Happenings
with Land Values
Kenton Springer, AFM
Assistant Vice President
Farmers National Company
Women
Managing Farms

2. Speaker: Kenton Springer, AFM
 About Me!
 Dairy farm boy from Elk
City, Kansas
 KSU College of Agriculture
BS Degree 1972
 Kansas Cooperative
Extension Ag-Agent
1972 to 1987
 Bank IV Kansas Trust
Department Farm Land
Manager
1987 to 1995
 Famers National Company
1995 to present

3. Who is Farmers National Company?
 28 state service area
 $450 Million in farm sales
 Appraisal service
 2,000,000+ Acres under
management care
 Oil and gas management in
40 states
 FNC insurance agency
 FNC commodity marketing
 Forestry management
 Hunting lease management
•Incorporated in 1929
•Land resource specialist
to absentee landowners
•Employee owned
•100 property
management specialists
•250+ real estate agents

4. Agricultural Land Values
 Historical trends
 Factors affecting
value
 Who buys farms
 Who sells farms
 Sales across
Kansas
 Are farms a good
investment?

5. Land Ownership Goals
Income
Goals
Investment
Plan
Tax Strategy
Family
Wealth
Inheritance
Plan

6. The Current Land Market
 Generational transfer
of wealth
 Supply and demand in
the land market
 Farm and ranch
incomes
 Economic influences

7. Generational Transfer of Wealth
 10% of 911 million acres of agricultural land
will change hands in the next five years
(2% per year)
 Only 1% or less trades in the open market each
year
 Therefore, an estimated 21 million acres of
farm and ranchland will be sold between non-
related parties in the next five years or 4.25
million acres per year (USDA Total Survey)
 Farmers National Company markets and sells
2.5% to 3.5% of the total land sold each year

8. Land Value Trend 1951-2015

11. Déjà Vue All Over Again?
 Similar to the 1980s
 Interest rates are increasing
 Extremely high input costs
 Over double the 2006 cost
to grow an acre
 A percentage of the
producers are under capitalized
 Banks are tightening credit
 The 1980s about operating capital
 Cautious land buyers
 A wait-and-see attitude in some markets
 Grains and livestock all now in break-even or
negative territory

12. Different than the 1980s
 Extremely low interest rates
 Significantly higher cost of living today
 Fewer commercial farm operations
 They are significantly larger and in
most cases less diversified
 More part-time and specialty farm
operations
 Lifestyle farms with off farm income
 Organics, truck farms, etc.
 Better crop insurance and farm program
 More money chasing ag today
 Multiple funds trying to buy land

13. A Changing Market Today
 Global markets
impact local
agriculture
 Increasing global
grain inventories
 Increasing dollar value limits our exports
 Farm leases are under pressure
 Income per acre is declining
 Pressure on expenses from bankers as
lending increases

14. Borrowing Trend Increasing!

18. $1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Avg.FarmPrice($/bu)
DaysofSupply
World Coarse Grains
Ending Stocks Days of Supply
Ending Stocks
USDA Corn Price

19. $3.50
$5.00
$6.50
$8.00
$9.50
$11.00
$12.50
$14.00
$15.50
$17.00
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Avg.FarmPrice($/bu)
EndingStocks(DaysofSupply)
World Soybeans
Ending Stocks Days of Supply
Ending Stocks USDA Price

20. $2.00
$4.00
$6.00
$8.00
$10.00
60.0
80.0
100.0
120.0
140.0
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Avg.FarmPrice($/bu)
Daysofsupply
World Wheat
Ending Stocks in Days of Supply
Ending Stocks USDA Price

21. Grain Yield and Price
Trends Impact Income

23. Balancing on the Edge
 Ag markets peaked first quarter of 2013
 Grain prices, rents, land prices
 Now, the fourth year in a row of declining incomes at
the farm level
 Livestock in general had a short-lived window of good
profits in 2014/2015
 Many cattle producers had very tough year in 2016
 Today, a mixed bag of who is or is not profitable
 Record crops in 2016
 Last time wheat, corn, and soybeans produced record
bushels per acre yields in the same year was 1979
 Pushed grain prices to the bottom post-harvest
2016

24. Balance Sheet Stress
 Farmer borrowing is on the
increase
 Land values are slowly retracing
 85% of ag equity is in land
 Machinery values have fallen
 Used machinery values hit hardest
 John Deere indicates that new row crop machinery
sales are down 50% to 75% since 2013
 As borrowing ratchets up, some banks are
suggesting asset sales
 Land and/or excess machinery

25. Commodity Market Influencers
 Strong US dollar
 Crude oil collapse
 Equities (stocks) more in favor
 Record large fall crop production
 Record “Short” positions
 Local demand = strong basis

27. Wall Street Money
Chicago Money

29. A Changing Market Today
 Land values are also
under pressure
 A slow ride down so far
Some markets have
dropped 15% to 25% from
the 2013 peak land price
History shows that for
every 2% drop in gross
farm income, land values
drop by 1% (Mike Duffy,
ISU)

30. Remember the Three-leg Stool
 Biofuels hit the market
 Ethanol started taking corn acres after 2006
 China found its appetite
 Soybean exports increased dramatically after 2006
 Monetary policy became more accommodative
 Interest rate of 0% in 2009 fueled
the ag markets
 Sprinkle in some short crop years and
you have a bull market!
The Basis for “The Golden Years of Ag”

31. A Stronger Dollar is Creating Headwinds
 Impacts our ability to export
 China imports 23 million soybean acres from the US
 The equivalent of the entire Nebraska crop every 36 days!
 Pork and beef exports are also a key to
market health
 Increases costs as borrowing is
increasing at the farm level
 Operating loan rates float
 Creates competition for money
 Eventually will impact land values
 Could stifle demand and even bring more land on the market

33. Upcoming Farm Ownership Changes
 70% of the nation’s farmland will change
hands over the next 20 years (Kohl)
 Up to 25% of farmers and ranchers will retire
 Average age of US farmers is 58 (increasing)
 40% of US landowners are over 70 years old
 30% of Kansas landowners are over 75 years
old
 In Iowa, non-resident ownership of land
increased from 6% to 21% during the period
1982-2007 (Duffy)
The Farm LASTS Project

34. Who is Selling Farms?

35. Who Purchased Farmland
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1989 1992 1995 1998 2001 2004 2007 2010 2013
Farmers Investors New Farmers Other
Duffy, ISU

36. Interest in Land as an Investment
 From 2005 to 2016, institutional funds with
farmland investments grew ten fold from 32
to 312 (Valoral Advisors)
 1% of $2.4 trillion ag real estate or $24 billion
 Mostly in the US (Bruce Sherrick)
 Individuals bought land
for various economic
reasons
 Water scarcity and
environmental factors

37. Low Supply of Good Land for Sale
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0
100
200
300
400
500
600
700
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Acres(thousands)
Figure 1: Farmland Turnover by Year
Acres Sold Turnover Est. Arm's Length Turnover
Source: University of Illinois
TurnoverbyYear

39. Net Return over the last 60 years averages 12.5%

44. FarmersNational.com/Real_Estate

45. Land Values in Kansas

46. Looking Ahead!

47. Demand Saves the Day
 Despite great crop years back to back, good
demand continues to support prices
 Nice post-harvest price bounce
 Wheat producers will cut acres for 2017
 Most lost money in 2016
 More soybeans acres or more corn?
 Herd expansion in livestock is a major
factor in demand
Grains

48. Demand Saves the Day
The Livestock Story
 Dairy is more positive about the year
 Pork prices are near break even
 Steady demand
 Poultry consumption is increasing
 Egg consumption is strong
 Up 50% from 20 years ago
 Every person in the U S consumes on average 240 to 260
eggs per year!
 Beef consumption is stable
 But it has been falling
 From 65# per person in 1996 to 52# per person in 2016

49. Keep
Focused
on
the…
POSITIVE!

50. Thank You!
www.FarmersNational.com