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Welcome to ANR at Noon February 22, 2013 What Will Happen to Land Values with $4.50 Corn and Will We Get There? ISUEO Economists Mike Duffy Chad Hart
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Welcome toANR at Noon
February 22, 2013
What Will Happen to Land Values with $4.50 Corn
and Will We Get There?
ISUEO EconomistsMike DuffyChad Hart
Recent Corn Prices vs. Costs
2.50
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
$ p
er
bush
el
Season-average Price Cost per Bushel
Corn Prices vs. Costs
1.00
1.50
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2.50
3.00
3.50
4.00
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5.00
5.50
6.00
6.50
7.00
7.50
$ p
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bushel
Season-average Price Cost per Bushel
Average Return on a Bushel of Iowa Corn, 1972-20115 cents per bushel
Corn Prices vs. Costs
1.00
1.50
2.00
2.50
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$ p
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Season-average Price Cost per Bushel
Projected Corn Supply & Use2013 2014 2015 2016 2017
Area Planted (mil. acres) 96.0 90.0 86.0 88.0 89.0
Yield (bu./acre) 163.5 165.4 167.4 169.3 171.3
Production (mil. bu.) 14,435 13,610 13,595 13,925 14,255
Beg. Stocks (mil. bu.) 647 2,067 2,232 1,817 1,672
Imports (mil. bu.) 25 25 25 25 25
Total Supply (mil. bu.) 15,107 15,702 15,362 15,437 15,622
Feed & Residual (mil. bu.) 5,250 5,300 5,250 5,375 5,475
Ethanol (mil. bu.) 4,675 4,825 4,825 4,850 4,900
Food, Seed, & Other (mil. bu.) 1,415 1,445 1,470 1,490 1,505
Exports (mil. bu.) 1,700 1,900 2,000 2,050 2,125
Total Use (mil. bu.) 13,040 13,470 13,545 13,765 14,005
Ending Stocks (mil. bu.) 2,067 2,232 1,817 1,672 1,617
Season-Average Price ($/bu.) 5.40 4.10 4.30 4.40 4.50
Source: USDA
Projected Corn Prices vs. Costs
4.00
4.50
5.00
5.50
$ p
er
bushel
Season-average Price Cost per Bushel
Based on those USDA projections
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1/1/2000 1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010 1/1/2012
Pri
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Recession Corn
How Did We Get Below $4.50 Last Time?
Land Prices at $4.50
• There is a strong correlation between land sales prices and price but it is not less than 70%
• There are other factors that influence price; one of the major ones is the prevailing attitude. A major drop in corn prices may have a greater impact than just the percentage drop would indicate.
Land Prices at $4.50
• The correlation coefficient between land sales price and profit has averaged 60% between 2005 and 2012.
• If these relations hold and a 25% decrease in price led to a 25% decrease in profits then land values should drop 15% or $1,260 an acre
• But,
Land Prices at $4.50
• Drop in commodity prices not exactly proportional to drop in profits
• Drop in commodity prices will have psychological impacts that could exasperate the decreases
• Land values will drop but it will be more like a tire with a nail than a bubble bursting
• Predicting how much they will drop is an inexact art
Thank you for joining us todayWe invite your feedback and suggestions for future ANR @ Noon webinars:
John Lawrence – [email protected]
Chris Mondak- [email protected]
Next date: March 29, 2013
