Agricultural Advisory Committee - TY 2013

Current Agricultural Use Values

Public Hearing March 1, 2013

Tax Equalization Division

Ohio Department of Taxation

IntroductionThis is a public hearing before the

Ohio Department of Taxation, March 1, 2013. We will be presenting data on the proposed tax year 2013 Current

Agricultural Use Values.

Agenda

Basic formula Factors used in the calculation

– Crop yields– Crop pattern– Crop prices & production costs– Capitalization rate

Calculation of Soil Values– Sample calculations– Minimum Values

Comparative Charts – USDA Cropland Value 2012 Data from Counties

Basic Formula

GOI = Crop Yield x Avg. Crop Price

NOI = GOI – Production Costs

Value = NOI/Capitalization Rate

Crop Yields Crop yields reported by the Ohio Agricultural

Statistics Service for the past 10 years are averaged (2002-2011).

That average is divided by the original yields published in 1984.

The resulting factor is applied to the yields of record for each soil type.

Soil yields from 1984 were increased by the following percentages:– Corn 25.85%– Soybeans 19.73%– Wheat 48.41%

Crop Yields The yield update increases the corn

yield for Miami Silt Loam, a soil with average productivity, from 108 to 136 bushels per acre.

By contrast, the average corn yield for all soil types in 2011 was 158 bushels per acre.

Cropping Pattern Single crop pattern for most soils. Based on the most recent five-year average

of acres harvested, 2007-2011:– Corn 38.7%– Soybeans 51.2%– Wheat 10.1%

Maintain 50% corn and 50% soybeans for organic and frequently flooded soils.

CROP PRICES & INPUT COSTS____________________

Crop Year CORN SOYBEANS WHEAT2011 6.40$ 11.90$ 6.60$ 2010 5.55$ 11.80$ 5.20$ 2009 3.70$ 9.60$ 4.35$ 2008 3.95$ 9.60$ 5.80$ 2007 3.95$ 10.10$ 5.50$ 2006 3.30$ 6.25$ 3.30$ 2005 1.80$ 5.55$ 3.20$ 2004 1.85$ 5.15$ 3.15$ 2003 2.45$ 7.20$ 3.20$ 2002 2.50$ 5.45$ 3.20$ 2001 2.00$ 4.40$ 2.50$ 2000 2.00$ 4.80$ 2.05$ 1999 2.00$ 4.80$ 2.10$

CROP PRICES USED IN FIVE YR. AVERAGESource: Ohio Agricultural Statistics Service

Tax Year CORN SOYBEANS WHEAT2013 3.91$ 8.98$ 4.54$ 2012 3.19$ 7.74$ 3.98$ 2011 2.89$ 7.22$ 3.64$ 2010 2.66$ 6.41$ 3.41$ 2009 2.29$ 5.60$ 3.05$ 2008 2.02$ 5.19$ 2.89$ 2007 1.96$ 4.89$ 2.64$ 2006 1.99$ 4.84$ 2.49$ 2005 2.06$ 5.12$ 2.49$ 2004 2.05$ 5.11$ 2.56$ 2003 2.11$ 5.34$ 2.69$ 2002 2.12$ 5.42$ 2.79$ 2001 2.25$ 5.74$ 2.95$ 2000 2.23$ 5.80$ 3.12$

ADJUSTED CROP PRICES IN MODEL

Adjusted Crop Pricesin the Model, 2010-2013

Difference

2010 2012 2013 10-13 12-13

Corn $2.66 $3.19 $3.91 $1.25 $0.72% change 47.0% 22.6%

Beans $6.41 $7.74 $8.98 $2.57 $1.24% change 40.1% 16.0%

Wheat $3.41 $3.98 $4.54 $1.13 $0.56% change 33.1% 14.1%

Production CostsBase & Added Unit, 2010-2013

Difference

2010 2012 2013 10-13 12-13

Corn $286.65 $350.71 $391.90 $105.25 $41.19

+bu $0.83 $0.90 $1.04 $0.21 $0.14

Beans $189.10 $227.51 $248.69 $59.59 $21.18+bu $0.66 $0.93 $1.12 $0.46 $0.19

Wheat $170.16 $211.52 $230.62 $60.46 $19.10+bu $1.14 $1.41 $1.61 $0.47 $0.20

CAPITALIZATION RATE_____________________________

Capitalization RateTY 2010-2013

2010 2013Mortgage/Equity Ratio 60/40 60/40

Interest Rate, 15-Year Fixed Rate Mortgage* 7.09 6.19Equity Rate** 7.45 6.05Tax Additur 1.4 1.5Capitalization Rate 7.8% 6.7%

*Rate for a MultiFlex mortage loan from Farm Credit Services.**Equity rate is the prime lending rate plus 2%.

Calculation of Soil ValuesComparison of Values

2013 Sample Calculation - Millgrove

SOIL: Millgrove, Silt LoamSLOPE, EROSION: 0-2, SLIGHTDRAINAGE: Very PoorlyPROD. INDEX: 100

CORN BEANS WHEATAdjusted Yield (bu/A) 181 62 95X Crop Price/unit $3.91 $8.98 $4.54 = GROSS INCOME / ACRE $707.71 $556.76 $431.30

Adjusted Yield (bu/A) 181 62 95Base Yield 118 36 52 = YIELD ABOVE BASE 63 26 43 X Added Unit Cost $1.04 $1.12 $1.61 = ADDED UNIT COST/ACRE $65.52 $29.12 $69.23 + Base Yield Cost/Acre $391.90 $248.69 $230.62 = TOTAL NON-LAND PROD. COST $457.42 $277.81 $299.85

NET RETURN / ACRE $250.29 $278.95 $131.45 X Cropping Pattern 0.387 0.512 0.101 = ROTATIONAL NET RETURN / ACRE $96.86 $142.82 $13.28TOTAL ROTATIONAL NET RETURN $252.96

Capitalization Rate 0.067

CAUV VALUE/ACRE: Net Return/Capitalization Rate $3,775.54 $3,780

2013 Sample Calculation - Miami

SOIL: Miami Silt LoamSLOPE, EROSION: 2-6, SLIGHTDRAINAGE: Well PROD. INDEX: 76

CORN BEANS WHEATAdjusted Yield (bu/A) 136 45 74X Crop Price/unit $3.91 $8.98 $4.54 = GROSS INCOME / ACRE $531.76 $404.10 $335.96

Adjusted Yield (bu/A) 136 45 74Base Yield 118 36 52 = YIELD ABOVE BASE 18 9 22 X Added Unit Cost $1.04 $1.12 $1.61 = ADDED UNIT COST/ACRE $18.72 $10.08 $35.42 + Base Yield Cost/Acre $391.90 $248.69 $230.62 = TOTAL NON-LAND PROD. COST $410.62 $258.77 $266.04

NET RETURN / ACRE $121.14 $145.33 $69.92 X Cropping Pattern 0.387 0.512 0.101 = ROTATIONAL NET RETURN / ACRE $46.88 $74.41 $7.06TOTAL ROTATIONAL NET RETURN $128.35

Capitalization Rate 0.067

CAUV VALUE/ACRE: Net Return/Cap Rate $1,915.70 $1,920

Minimum Use Values

Slopes 25% or Less 2008 2009 2010 2011 2012/13

Cropland $100 $170 $200 $300 $350Pasture $100 $170 $200 $300 $350Woodland $100 $100 $120 $200 $230

Slopes exceeding 25%Pasture $100 $100 $100 $200 $230Woodland $100 $100 $100 $200 $230

Average CAUV per Acre 2006-2013

Product. Index

2006 2007 2008 2009 2010 2011 2012 2013

0-49 108 100 100 176 200 300 350 350

50-59 134 100 100 200 214 328 362 516

60-69 125 123 188 435 436 632 610 1218

70-79 241 283 431 746 845 1126 1147 1958

80-89 465 521 708 1059 1278 1641 1717 2743

90-99 675 747 973 1368 1601 2017 2128 3310

100+ 880 970 1200 1620 1900 2380 2490 3780

TOTALS 177 $181 $249 $459 $505 $700 $719 $1205

Cropland, Average CAUVDollars per Acre

1998-2013

1998 2001 2004 2007 2010 2011 2012 2013$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$258 $231$135 $181

$505

$700 $719

$1,205

Average CAUV andOhio Cropland Value - USDADollars per Acre, 1998-2012

1998 2001 2004 2007 2010 2011 2012$0

$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000

$2,150$2,520

$2,920

$3,820 $4,050$4,400

$5,000

258 231 135 181505 700 719

Contact Information

www.tax.ohio.govGovernment, Real Property Tax

Ohio Dept. of TaxationTax Equalization Division614.466.5744