The 81st annual Soil Management and Land Valuation Conference will be held May 21 at Iowa State University in Ames. "At 81 years old, this is the longest running conference at Iowa State," says ISU Extension economist Mike Duffy. He helps select the topics and speakers for the program each year.
"This conference is well attended. Last year 280 people came," says Duffy. "It's a popular meeting because of the subject matter and it is approved for six hours of continuing education credit for farm realtors and appraisers. That helps with attendance. The conference is designed for professional real estate people, appraisers and others involved with the sale of farms and agricultural land. We also have some farmers who attend. Anyone interested is welcome to register and pay the fee to attend."
Register by May 12 to get the discount
Registration deadline for this conference is May 12 to get the early registration discount. Cost is $80. You can register through ISU conference services. If you wait until after that date to register, the cost goes up $10. "If you ask for continuing education credit—either for real estate or appraisal—then there's a little extra charge," he notes.
It is half and half—in terms of the attendees who take this course for credit and those who don't take it to collect the academic credit. Duffy says, "If you are a lender or other interested person, such as anyone who is interested in what the land market is doing, I'd recommend you attend this conference and pre-register by May 12," he says. University Conference Services can be contacted by e-mail at [email protected] or by phone 515-294-6222.
Land price prospects to be discussed
Land values are the first topic on the agenda. Every year since the 1960s the attendees have been asked to make their projection for a six month, 12 month and a longer look into the future for where they think land values are headed.
This "snapshot survey" of attendees each year has been very good at the six month projection. "This survey gives us an indication of where the real estate appraisers and other farm management professionals see the land market going," says Duffy.
In recent years land values have kept climbing. Will that also be the case in 2008? "We see nothing now to indicate land values for this year won't be up again," says Duffy. "It's more of a question of how high will they go, rather than direction. The Realtor's Land Institute in Iowa recently issued the results of their September to March survey and it showed Iowa farmland prices were up 11% for that six month time period."
Direction for cropland price is up
Whether Iowa farmland values will continue to move up at that same rate for the full year of 2008 is debatable, and bidding for land does slow down a little during planting season, but this is still a market that is moving up, says Duffy. "While the direction for Iowa land values is still going to show an uptrend this year, it'll be interesting to see what the group we survey at our conference thinks regarding the actual amount of increase they expect for 2008."
What impact are the increased land values having on cropland rental rates in Iowa? Iowa farmers rent a lot of land to plant crops. "Rent has historically always lagged a little bit behind land values," he says. "When you look back at the period in the 1970s and also consider the drop that land values took in the 1980s, land rents lagged a year or so behind land values."
Cropland rental rates are still rising
Today, Iowa is seeing a lot of corrections in land rental rates. "One of the things different about land rents this go-around is we've had a number of rents in Iowa that haven't been adjusted for a long time," notes Duffy. "So we are seeing some adjustment in land rents now--and that may indicate rents are moving a little bit higher in 2008 than you would normally expect in just a one-year period."
A good reading of what land rents are doing will be ISU's annual cash rent survey. Duffy says the survey results will be available in late May or early June. "That survey will give us a feel for exactly how high rents have gone this year. It's interesting to note that based on last year's numbers, we're at a historical rent-to-value low."
"So the indication is Iowa in the year 2008 will likely see some correction in cropland rental rates above what we are seeing in land values," he says.
Effect of bioeconomy on land market
The bioeconomy is also on the program agenda for the May 21 meeting. The bioeconomy is a big factor in the strength we are seeing for crop prices today and for land values as well. "The bioeconomy is a key driver of grain prices and land values," says Duffy.
"At the May 21 meeting, we'll look at how sustainable this bioeconomy is," he adds. "One issue that keeps coming up is that we are facing potential environmental problems. Those problems are arising because of all-out increased corn and soybean production. Speakers on May 21 will address water quality, water quantity and water use by ethanol plants, biodiesel plants and intensive crop production on the farm."
Another topic to be covered at the May 21 conference is infrastructure. "This is something farmers don't always think about. But how are we going to move all this ethanol from Iowa to the rest of the country? We are producing most of the ethanol here in Iowa but we don't have all of the cars who will be consuming it. So transporting ethanol to the big-user markets outside of Iowa is a very large, looming issue."
Grain price outlook affects land price
The year 2008 is one a lot of people are paying very close attention to, given the smaller size of the carry-over grain stocks the U.S. has and the current and future demand for corn and soybeans. With this late start on planting this spring, there is an increased possibility 2008 could end up being a below-trend year for corn and soybean yields.
What would happen if the U.S. has a short crop in 2008? Duffy says, "I think with some of the corn prices we've seen already this year, if we end up having a short crop in 2008, you could be looking at corn prices that'll move higher—and those kinds of corn prices would have been pretty good bean prices not that long ago."
It's important to have a discussion about these possibilities and think ahead. "Two years ago who would have predicted $5.50 corn for right now? There might have been someone out there who was doing it. But it wasn't me," says Duffy. "In this kind of extremely volatile market it's important for us to have a feel for what may be coming in terms of grain prices."
Rising input costs are concern
Cost of corn and soybean production is another topic ISU economists will address at the May 21 conference. While grain prices are high, the negative factor is the rising cost of production. "Cost of production is the biggest negative, in my opinion," says Duffy. ISU's estimated cost of corn production for 2008 in Iowa, just on the variable costs (that is the cost for seed, fertilizer and fuel) is up about 20% from a year ago. That's a significant jump.
As you think about what's going to happen to land values in the future, the value of land is income-determined, and if the income is being held back because of higher input costs, that will have an impact. "We definitely are seeing seed, fertilizer and fuel costs today at levels we didn't think they would be when we talked about this a year ago," notes Duffy. The energy market is one that offers a great deal of uncertainty right now. "And the more we can learn and think about it, the better off we'll be as far as preparing for the future," he adds.