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2014 Pheasant Outlook

The South Dakota Game, Fish and Parks (GFP) has completed the annual pheasant brood survey and the results show a 76 percent increase in the statewide pheasant-per-mile index from 2013.

From late July through mid-August GFP surveyed 109, 30 mile-routes across the state to estimate pheasant production and calculate the pheasants-per-mile index. The survey is not a population estimate, but rather compares the number of pheasants observed on the routes and establishes trend information. Survey routes are grouped into 13 areas, based on a local city, and the index of each local city area is then compared to index values of the previous year and the 10-year average.

“With favorable weather conditions this past winter and spring, along with the availability of quality nesting habitat across the state, we are going to see an increase in this year’s pheasant population” stated Jeff Vonk, GFP Secretary. “Survey results show pheasant numbers rebounded the strongest in central South Dakota; especially in the Pierre,

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Chamberlain, Mobridge and Winner areas. Results also indicate that pheasant numbers are substantially higher than 2013 throughout much of eastern South Dakota.”

The 2014 statewide pheasants-per-mile index of 2.68 is up from 1.52 in 2013. The statewide pheasant-per-mile index is similar to 2002 when hunters harvested 1.26 million roosters.

No Crash in U.S. Farmland Despite Tumbling Grain Prices

Published by Colvin & Co, LLP (September 9, 2014)

(Reuters) David Fullington paid a “ridiculous” price of $13,600 an acre for a 200-acre (81 hectares) farm in Illinois within the last year and says he and his partners would probably bid again for prime land that is in tight supply, despite tumbling grain prices.

“No regrets at all,” Fullington said of the purchase of his neighbor’s land, now farmed by a son of one of his partners. “Very seldom do you get an opportunity to buy something right next door to you. There’s always a little extra value there for you.”

In the 1980s, sharp falls in corn and soybean prices hit farm incomes hard and land prices tumbled, hurting the rural economy in the world’s biggest grains producer. The pain spilled into the financial sector as defaults on loans pegged to farmland values rose.

U.S. policymakers and bankers had feared a repeat this year, but instead, U.S. farmland prices are already up 8 percent as of Aug. 1 according to the U.S. Department of Agriculture (USDA).

They expect values – especially for prime farmland – to hold near record highs even though corn and soybeans are at four-year lows.

The reason? Farming families like the Fullingtons have money from recent boom years to invest into assets they think give long-term value. Levels of debt are also lower than in the 1980s.

And after five years of record grain prices, led by corn on the back of booming biofuel demand, and export demand led by China, farmers have enough wealth to weather this fall. All time-high harvests that triggered the slide also provides a cushion as there are more crops to sell.

Government crop insurance programs, boosted again in the latest five-year farm bill signed in February, have also given grain farmers added protection.

New demand is coming in too. Livestock producers are seeking more grazing land as they rebuild herds after years of drought and are benefiting from record cattle prices.

“The agricultural sector has been highly profitable so you still have a lot of money out there, a lot of wealth,” said Nathan Kauffman of the Kansas City Federal Reserve, who oversees the bank’s quarterly survey of Plains crop land prices, which are up 6 percent this year.

DODGING THE TSUNAMI

Farmland acts as the main collateral for farm loans and amounted to $2.45 trillion or 85 percent of farmer assets in 2014, up from 79 percent in 2010, according to the USDA’s latest data. In the same period, land asset values for farmers rose 35 percent, extending a decade-long climb, interrupted only briefly in 2009 during the global financial crisis.

“I think the good properties will sell this fall,” said Jim Farrell, head of Farmers National, the largest U.S. farm management company and top auction house in the country, based in Omaha, Nebraska.

He said spring auctions saw 90 percent of properties sold on the day of auction and 95 percent in the same week.

“I don’t see that deteriorating a lot,” Farrell said.

Just two weeks ago, a farm in the country’s top crop state of Iowa fetched $14,100 per acre – just below last year’s record when corn prices were much higher, according to Randy Hertz of Hertz Farm Management in Nevada, Iowa.

“That really surprised me how strong that was,” Hertz said.

Farmland auctions take place throughout the year but autumn is the busiest season as crops are harvested and the end of the tax year looms.

Farmers make up the bulk of buyers, both to work the land themselves and as an investment to be managed or rented out.

An Iowa State University study in January showed farmers made up 80 percent of buyers of farmland in the top corn and soybean growing state, 18 percent were investors – including farmers buying land to be managed – and the remaining 2 percent were other buyers such as churches and non-profit groups. Iowa does not allow big corporations or partnerships to own land, with most farmland owned by couples or individuals.

“People talk about institutions investing in farmland but we are still a small fraction of what is happening in the marketplace,” said Jeffrey Conrad, head of investment firm AgIS Capital which advises farmland buyers and hedge funds.

Financial investors have generally been more cautious this year because of the fall in grain prices and the prospect of higher interest rates, which would make borrowing to buy farmland more expensive. But many retain a long-term bullish outlook for U.S. grain and meat as world demand, led by China, looks set to keep rising.

“You’ll definitely see downward pressure, clearly 5-10 percent you could see,” said Conrad, adding that most investors were waiting on the sidelines and while there could be some softening he expected no crash in months ahead. “If you saw any real downward pressure on values, there’s enough capital on the sidelines to support it. They will come back into the market if the values start to fall.”

Fullington said he and his partners were not ignoring lower crop prices or the outlook for interest rates to tick higher in the next 12 months as the Fed trims its bond buying.

“But that’s short term,” he said. “In the long-term personally I think there’s no better investment than farm land.”

http://www.reuters.com/article/2014/09/07/usa-farmland-values-idUSL3N0R565R20140907

Why Invest in Farmland?

Published by Colvin & Co, LLP (May 12, 2014)

Everyone has to eat in order to survive and the production of almost all food can be traced back to farmland around the world in some way. Demand is growing for farmland as the world’s population and global needs for food increase. What many don’t realize is that the supply of farmland is not changing, thus creating a severe imbalance in the supply and demand of farmland.

An investment in farmland over the long-term will provide a steady stream of income and capital gains due to the increasing global demand for agricultural commodities, driven by the rising world population, rapid growth in emerging markets, and continued demand for ethanol and biofuels. Demand for agricultural commodities is outpacing supply, positioning farmland for long-term appreciation.

In brief, the following factors are important in driving the fundamental investment rational for farmland investments:

Cash Returns – Farmland is a performing asset, generating modest cash returns of 4-6%, depending on location and crop.

Land Scarcity – There are approximately 3.5 billion acres of arable land in the world with the potential for adding a mere 20% over the next 20 years.

Food Demand – As incomes rise, demand for proteins will increase with corresponding increases in the need for feed grains. Demand is growing in developing countries: The USDA expected exports to rise up to as much as $167 billion in 2021 from $82 billion in 2007.

Bio-fuels – Agriculture and energy markets are now bound together by federal mandates for renewable fuels. The USDA estimates that 40.5% of the U.S. corn crop was used for ethanol in 2011 and 43.1% was used in 2013.

Declining Inventories Worldwide – Inventories of grains, as measured by “Stocks to Use” ratios have been trending down in many countries. In the U.S., there is a roughly 35-day supply of corn. In China, declining stocks has created the potential for increasing imports of corn.

Low Farm Sector Debt Levels – The U.S. farm sector has a healthy Balance Sheet. Current debt to assets ratios are at 40-year lows and 78% of Iowa farmland is free of debt.

U.S. Infrastructure – From transportation and storage networks to the stability of Government programs and the know-how at U.S. universities, the U.S. farm sector has the ability to grow and efficiently market large volumes of feed and foodstuffs.

Inflation Hedge – Many economists expect inflation in the longer term as large federal deficits and the Federal Reserves’ easy money policy will create conditions for high inflation. Farmland is highly correlated to inflation and negatively correlated to most other financial asset classes.

Resource Conservation – Agriculture production must be managed as a sustainable resource to feed the world’s growing population. Water is a vital resource and is a limiting factor for irrigated agriculture throughout the world.

Sustainable Asset – Farmland improves in productivity over time when well-managed.

World Population Growth:

Approximately 7.0 billion people inhabit the earth in 2012, according to the U.S. Census Bureau, compared to 1.7 billion in 1900 and 5.8 billion in 1985. The rate of population growth is not expected to temper as the United Nations (U.N.) estimates the world’s population will likely reach 9.2 billion in 2050. The majority of population growth is expected to originate in emerging economies with developed countries remaining stable.

In order to feed the world’s growing and longer-living population, agricultural output will need to double by 2050 according to the U.N.’s Food and Agriculture Organization (FAO). This will be a daunting goal to accomplish as agricultural resources are already strained. In the last decade, agricultural output has grown by 2.4% annually. In order to double agricultural output by 2050, output must increase at 3.4% per year.

Historical grain production statistics suggest reaching this goal will be difficult. In 9 of the last 10 years, the global consumption of grain has outpaced production according to the USDA. To meet future demand, experts are predicting that global agriculture will need to produce more food in the next 50 years than what was produced during the previous 10,000 years, putting more and more pressure on future farmers and the land they use to produce our food.

Agriculture Exports:

The reason food demand is growing faster than population growth is the development of middle classes in emerging markets, due to above average GDP growth. The Brookings Institution estimates that by 2021, China’s middle class could grow to over 670 million, compared to only 150 million in 2010. Economists have long shown that as GDP rises, so does the consumption of animal protein as a percentage of diet. As emerging economies continue to develop, there will be a transfer from a grain-based diet to a protein-based diet.

Roughly half the increase in global calorie consumption in the past decade has been a result of higher meat consumption according to the FAO. On average, it takes two pounds of grain to produce one pound of chicken, five pounds of grain to produce one pound of pork, and seven pounds of grain to produce one pound of beef.

The rapid industrialization of developing markets will have serious repercussions on the demand for grain. In China alone, we may have roughly 500 million more people demanding a protein-based diet. As the world’s middle class continues to develop over the next decade, the demand for grains will grow exponentially.

Increasing Use of Biofuels:

Concerns regarding climate change and fossil-fuel dependency have led to a significant focus on renewable fuels, such as ethanol, as a replacement for high polluting carbon-based fuel sources. Ethanol is primarily manufactured from crops such as corn, wheat, and sugar cane. According to the USDA, ethanol production in the U.S. has increased from less than 3 billion gallons in 2003 to over 13 billion gallons in 2013. The Renewable Fuel Standard from the 2007 Energy Act calls for total renewable fuel to reach 36 billion gallons by 2022.

The USDA estimates that more than 40% of the U.S. corn production was used to produce ethanol in 2012. Ethanol demand is expected to stabilize and continue to consume roughly 40% of the total U.S. corn crop per year for the next decade according to the USDA. In January of 2011, the EPA approved the use of E15 gasoline for vehicles manufactured 2001 or newer. Currently, almost all gasoline in the U.S. is E10, or 10% ethanol. The increase to E15 will help the U.S. in its goal of using 36 billion gallons of renewable fuel by 2022. Ethanol exports are also steadily increasing due to growing biofuel demand from the EU and Brazil.

Agricultural Fundamentals:

Grain supplies, in the U.S. and globally, are at decade lows, driven by emerging-market demand, disappointing U.S. yields in the last three years, and demand for biofuels. Ending corn stocks to usage ratio (current inventories as a percentage of annual consumption) has declined over the last eight years from roughly 20% in 2004 to 9.9% in 2013. U.S. corn stocks declined to a roughly 35 day supply, meaning that if corn production was halted, the U.S. would run out of corn in a little over a month.

The global demand for food and rising commodities prices have driven agriculture fundamentals to the best in decades. The USDA estimates that farm income rose 29% in 2010, 51%, in 2011, and will rise by 15% in 2013, allowing farmers to reinvest their cash flows back into farmland to expand their operations.

Despite the rapid growth in agriculture over the last few years, farmers’ balance sheets remain very conservative. Strong farm income and minimal use of debt have allowed the U.S. farm sector to maintain conservative balance sheets as current debt to assets ratios are at 40 year lows. According to Iowa State University, 78% of the land in Iowa has no money borrowed against it.

Historical Returns:

Farmland, through current income and capital appreciation, has been one of the top performing investments over the last century. Over the past 100 years, farmland has only decreased in value three times: during the Great Depression, the inflation crisis of the early 1980s, and most recently during the housing crisis of 2008 and 2009.

Despite three bumps in the road over the last 100 years, historical U.S. farmland returns are one of the most attractive asset classes that compares favorably with more traditional assets such as stocks and bonds. Over the last 20 years, American farmland has provided a total return to investors of 12.4% that is a combination of appreciation and current income from cash rental contracts. Similar long-term appreciation in farmland has been experienced in Europe, South America, and Australia.


One of the most attractive attributes of farmland is the cash rental income. Since 1967, cash rents have yielded roughly 5.7%, although the yield has declined from 6.7% in 1967 to 4.1% in 2008, primarily due to the rise in farmland values. Cash rent yields have increased from the nadir in 2007 and we expect the yield to continue to approach the historical 40-year average of 5.9% as farmland incomes rise.

Conclusion:

An investment in farmland provides investors an opportunity to diversity from traditional asset classes as farmland returns have been negatively correlated with equities and bonds, and with only a modest positive correlation with commercial real estate. These characteristics make it an excellent diversification tool that can balance a portfolio and offset financial and commercial real estate market volatility.

Farmland is frequently compared to investments in gold because of its characteristic as an inflation hedge. However, unlike gold, farmland also produces stable income streams and as a consequence it has been described as “gold with yield.”

Farmland is a long-term investment that will be the key to feeding the world’s growing population. Farmland is the one ingredient in food production that cannot be replaced and is a sustainable asset that will last many generations.

Dakota Properties Selected as One of America’s Best Brokerages

2013-Best-Brokerages-300x264Spearfish, SD (July 2014) – The editors of The Land Report (www.thelandreport.com), “The Magazine of the American Landowner,” presented their fourth annual survey of the country’s leading real estate firms specializing in land. Dakota Properties has again been selected as one of “America’s Best Brokerages” for the fourth straight year.

The “America’s Best Brokerages” list by The Land Report includes Dakota Properties for the fourth year in a row. In the Great Plains region, Dakota Properties was one of only 3 land brokers in the 4 state region selected for the list. With over $100 million in sales for 2013, and over $411 million during the past 4 years, Dakota Properties continues to be the premier leader in real estate sales for the region. Broker/Owner Jeff Garrett commented, “We would like to thank The Land Report for this recognition. It takes a lot of hard work on the part of our sales team and the support of our new and returning customers to gain this status.” Contributing to the firm’s “Best Brokerage” status are a team of seasoned land professionals, many with specialty credentials, who cover the states of South Dakota, North Dakota, Wyoming, Montana, Nebraska and Minnesota. All of the firm’s real estate agents are land professionals and are authorities on all types of real estate.

About Dakota Properties Real Estate
Dakota Properties is regarded as an authority on all types of real estate. The Dakota Properties team of real estate professionals offers private treaty and auction services through its network of 8 affiliate offices in South Dakota, North Dakota, Nebraska and Wyoming. For more information, please visit www.DakotaProperties.com.

Spring Pest Update

John Ball, Forest Health Specialist SD Department of Agriculture, Extension Forester SD Cooperative Extension

How cold is too cold for woody trees and shrubs? While it has been very cold for a longer period then most of us have seen for a while (or wish to see again), it has not been that tough on our plants. Most of our woody plants that we use in the state can tolerate temperatures to -30F or even -40F by mid-winter. Most of the “winter” injury we see in this state is not the result of long periods of very cold temperatures but widely fluctuating temperature in late autumn and late winter. If we have winters where the temperatures warm into the 50s F for a week or so in late winter and then drop to the subzero that is when we see injury. Most of the state it has stayed consistently cold so far this winter so there has been little injury yet, however we still have another month to go. The Black Hills region which has been some wide temperature swings this winter is probably the only place where marginally hardy plants may be experiencing some winter injury.

How about insect pests? The cold winter is not having much of an impact on mountain pine beetle larvae. Our inspections of infested trees a couple of weeks ago found very few dead larvae. The majority appeared very healthy and will no doubt survive this winter to continue their development to adults and emerge in July and August to infest new trees. Emerald ash borer, which has not been found in the state, may have been impacted by the cold that has occurred in much of the northeastern and north central United States. Several days of sustained cold (-20 F) can kill the majority of larvae beneath the bark, however, it may not have been cold enough, long enough to kill many and even if 95 percent of the larvae are killed by the cold, the population can rebound very quickly.

Great Lodging Option In The Heart Of The Glacial Lakes

Visitors to Northeast South Dakota have a great lodging option at Hidden Hill Lodge, located southwest of Eden.

Constructed in 2007, this beautiful lodge is located on 316 acres near superb waterfowl, pheasant, deer and turkey hunting. World class walleye and northern pike lakes are within minutes of the lodge. The property overlooks approximately 150 acres of land under water which we call “Hidden Hill Lake.” This custom built lodge is approximately 5,808 sq ft with vaulted ceilings, 2 fireplaces, 2 full kitchens, 11 bedrooms, 7.5 bathrooms, game room, 2 decks and a hot tub. Many more amenities too numerous to mention. A must see for private, community, or corporate use in a very private and serene setting.

See their website www.hiddenhilllodge.com for more information about lodging options and availability.

OUTDOORS – Hunting Lands Still Worth Investing In

by John Woods – Published 9/6/13

What is it they say about land? “Better get you some, because they are not going to make any more of it.” Landfills not withstanding. When I talk to hunters of all ages, regardless of the game species they like to pursue, everybody dreams about owning their own place one day.

As it turns out these days, making a long-term investment in land whether to produce a commodity to generate revenue like agricultural land or timber, buying land is one of the smartest investments one can make. If that property also happens to offer recreational values for hunting, fishing, camping or whatever that is added value to the owner.

In fact, most recreational land buyers these days are also shopping for collateral values from the same property. Hunters buy deer hunting land thinking the timber might produce residual value one day. Maybe some row crop land on the place could be leased to a nearby farmer looking for additional soybean acreage. Perhaps a hay field could be utilized to produce high value hay for livestock producers. The options can be endless.

Why Land Makes a Good Investment

According to Jacob Sartain, vice president of Sartains Heritage Properties, LLC of Madison (www.sartainsheritage.com), “Land has been and always will be the best and strongest long-term investment strategy for several reasons. Most all land has the ability to produce some type of commodity such as timber, grain crops, and minerals such as oil, gas, and gravel.”

“All investment strategies end up pointing in the direction of land as the most stable and safest investment when factored on a +/- 30-year investment. Land hedges against inflation and is a hard asset that be borrowed against,” says Sartain.

Sartain advises that land is always a buyer’s market when like now there is high interest in agricultural and commodities property making them very attractive to buyers. Right now these lands can offer a good return on the investment.

“Other types of land investments are the same such as timber investment. Today timber prices are somewhat moderate creating a situation where certain investors are interested in purchasing timber lands because of a reduced value on the timber asset. Buyers know that this will change in the future. By purchasing at the bottom of the curve will allow for capitalization when the prices of timber rise,” Sartain noted.

Meanwhile as the timber continues to mature toward a future harvest, the owners can build a weekend retreat and develop the land for hunting deer, turkey and small game. They can build a lake for fishing with a long dock for watching sunsets. Land ownership presents many opportunities for outdoors family recreation. This becomes even more added value to the long-term land investment.

Levels of Investment

For my money land has never been priced at what one would call “cheap”, but then that is a relative term. When I tell young people today (anybody under the age of 60) that I remember paying 15-cents for a gallon of gasoline, a nickel for a bottle of Coke-A-Cola, and 25-cents for the local movie theatre and that cost included a soft drink and a candy bar, they look at me like I am crazy.

Likewise when I tell folks I paid $275 per acre for hunting land with a mile frontage on the Big Black River, they are sure I am pulling their leg. I’m not. That was back in 1991. Wonder what it is worth today? For sure it is worth a lot more than if I had put that same money into a bank savings account or in a CD at today’s rates.

“Hunting land values today vary across a wide range depending on the area the property is located in and what’s on the property as far as habitat for wildlife. Most all investors when buying hunting land want to be located within an area that consistently produces quality game, whether it is ducks in the Delta or deer in the hills or perhaps a combination of both,” stated Sartain.

“In Mississippi across the board hunting lands can range from a low end value of $1000 per acre to a high end of $3,000 per acre. It is all about quality and location.” Shopping for such recreational lands also means assessing the infrastructure already built into the property. Are there roads, building structures, established food plots, ATV trails, electric power, water and other amenities? Buyers either have to pay for these features up front with the land purchase or spend considerable out-of-pocket dollars to create them.

Bank Lending for Hunting Land

“Lending for

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land is not as difficult as some may think. There are several options when it comes to financing and there are lots of lenders out there. In today’s market we find a fiscally sound individual can obtain financing around 80/20 or in other words, 20 percent cash invested while financing 80 percent of the amount. Interest rates are very low in the 4-5 percent range with flexible terms out to 30 years (this is as of end of April),” Sartain counsels. Indeed conditions are very favorable these days for land ownership.

In summary, “Land is easy to recognize as a most sound investment. Just look at America’s 100 wealthiest individuals and you will find overwhelmingly the majority are invested in land,” Sartain reports.

Sounds like a good time to look into land ownership for outdoors recreation, hunting or just enjoying a get away place of your own. It may well prove to be the best investment you ever made.

Farm Income Expected to Outpace the Prior 10-Year Average

Net farm income is forecasted to be $95.8 billion, $8 billion above the previous 10-year average. Although the expected net farm income is healthy, it is a 26.6% decrease from 2013′s record forecast of $130.5 billion. Production expenses expected to fall for only the second time in the last 10 years.

Income Forecast Remain Above 10-year Watermark

The 2014 forecast of $95.8 billion is the lowest since 2010, but still 8.35% above the prior 10-year average of $87 billion. Net cash income is forecasted at $101.9 billion, down 21.45% from 2013. Net cash income is expected to decline less than net farm income because it reflected the sale of more than $6 billion in carryover stocks from 2013.

Farm Income 1

 

 

 

 

 

 

 

 

 

 

Crop Production Value Struggle to Keep Pace With 2013

Value of crop production in 2014 is expected to decline after large gains in 2013. All major crop categories are expected to be effected as a result. Sales receipts and value inventory changes for corn are expected to fall due to large increases in production, suggesting a significant decline in the average price of corn. US wheat’s annual price is expected to drop because of large global yield forecasts and declines in other feed grain prices which have reduced domestic demand. Soybean receipts and value of production are also expected to be down in 2014 due to an expected 19.3% decline in the annual price. The soybean-to-corn-calendar-year price ratio is predicted to be 2.7, suggesting that farmers will shift a considerable number of acres to soybeans in 2014.

Farm Income 2

 

 

 

 

 

 

 

 

 

 

Production Expenses Expected to Fall

Production expenses are expected to fall in 2014 for the first time since 2009. Though expenses remain well above what they were in 2012, the decline interrupts what has been a rapid upward movement in expenses increasing 84% in the last 10 years. The three major crop expenses are seeds, fertilizer, and pesticides, are expected to fall a combined $2.9 billion or 4.7%. Fertilizer was the driving force behind the decline. Expected expenses for fertilizer use in 2014 fell $3.1 billion or 12%.

Outlook

Farmer income remains healthy moving into the 2014 planting season, even amid drastic reductions in crop prices. The volatility of demand and weather play a key role in the development of a crop year, making it difficult to forecast. The USDA makes their forecasts based off of optimal weather conditions; over the past two years, the U.S. has experienced anything but optimal weather.

Posted by http://farmlandforecast.colvin-co.com on February 12, 2014.

10 Factors That Drive Farmland Value

 

Here are the big-picture issues that affect the worth of your farm.

Soil type, drainage and location all play into the dollar value of your farmland. But as the agricultural industry becomes more global, so do the factors impacting your farm.

“In agricultural economics, a lot of issues are linked together,” says David Kohl, professor emeritus of agricultural economics at Virginia Tech. “Sometimes you have to take step back, think strategically and connect the dots.”

“People have an intuitive sense of what their land is worth,” says Tim Hopper, chief economist at TIAA-CREF, a financial services and investing organization. Yet to stay ahead of the curve, he says, farmers should think beyond their farm gates. Here is some food for thought on the macro issues that affect your farm’s value.

1. Global population growth 

The world’s population is forecast to reach 9 billion by 2050. While that is a significant increase from the current 7 billion people, Hopper says the key issue is population distribution.

“The areas of the world that have growing populations and caloric needs also have increasing incomes,” he says. But in many of those places, agriculture cannot expand to meet this growing demand. Therefore, productive land in other areas of the world increases in value.

2. Water

Like population, water is not dispersed evenly around the world. Hopper says trade allows us to move products from where we have water to where we need water. “Trade in crops is basically trade in water,” he says.

While water issues are more pronounced in other areas of the world, recent prolonged U.S. drought conditions have made water supply a national hot topic. Kohl says water availability, either through irrigation or drainage, will factor into farmland value. “Top-quality farm ground, with water under it or near it, is a premium,” he says.

3. Wall Street

High farmland returns have attracted the interest of investors, landowners, lenders and operators, adding more competitors at farmland auctions. After 2008, several funds realized a lot of their diversified portfolios weren’t as stable as originally thought, says Bruce Sherrick, University of Illinois professor of agricultural and applied finance.

While Wall Street types like several aspects of the farmland and ag markets, it’s not an easy industry for outsiders. “There’s not a ticker symbol for farmland,” he says. “A parcel of land requires some specific knowledge to operate.” He says farmland investments have historically added return and have reduced risk, though the risk impacts are often more important”.

4. Interest rates

For the past few years, many farmers have been able to purchase land with loans at extremely low interest rates. Long-term, Hopper says interest rates average around 4.5%. Today, he says, interest rates average around 2.5%, and recently they were closer to 1%.

Any major change in monetary policy could alter farmers’ and investors’ attitudes about future land purchases. When considering changes in policy, Kohl likes to factor in the 320/260/60 rule. “Around 320 million people live in America, with 260 million of those living in urban areas,” he says. “Only 60 million are left in rural America. A lot of our economic policy will be based toward the 260, instead of the 60.”

5. Shale energy

Like water, the potential of what’s under your land might become more important than the soil on top. Vast shale plays in many areas of the country are now accessible through horizontal drilling and hydraulic fracturing.

“The shale energy revolution is tremendous in the U.S.,” Hopper says. “The U.S. is now the largest producer of oil and gas in the world. We are still importing, but our trade deficit is starting to shrink.”

6. Foreign exchange rates

A strong U.S. dollar equals more value for U.S. products, but it also means U.S. products are more expensive to foreign buyers. Hopper says since capital is scattered in the world, currency exchange rates greatly impact land values.

A falling dollar equals high commodity prices, which raise farmer profits and increases rent and land values. On the flip side, he says, a rising-dollar environment lessens farmland values.

7. Regulation

Whether dealing with banking, ethanol mandates or animal welfare, regulations are an invisible threat for U.S. farms, Kohl says. As a dairy producer, he has seen how quickly a new rule or regulation can cause major problems – even with his own operation. He says producers must be proactive.

Hopper agrees and says staying up-to-date on U.S. regulations is vital, as they can easily create a domino effect. “There are many countries that take U.S. regulations, put their own stamp on it and enact it into law,” he says.

8. Wine

Why would wine make this list? “I call it the $4.99 box of Gallo revolution,” Hopper says. “Wine consumption in the U.S. is going up about 14% per year, and in the world it is going up about 4% a year.”

Demand drives change and now the U.S. is the largest wine consumer in the world. “This is a tremendous shift that has led to a change in the dynamics of the price of land,” Hopper says. By comparison, he says, an acre of corn valued at $12,000 in the Midwest translates into an acre of grapes valued at $100,000 in the heart of Napa.

Don’t expect to see corn fields converted to grapes any time soon, but when you consider wine is now produced in all 50 states, there is potential. “Land value is determined by the value of what you can produce off that land,” Hopper says.

9. The rise of China

China as a population center, buyer of U.S. goods and global player is top-of-mind for the ag industry. Hopper says one of China’s biggest problems is lack of rainfall. China encompasses 20% of the earth’s population and 7% of the earth’s water resources.

“How do you feed 20% of the world’s population on 7% of the world’s rainfall?” Hopper asks. “You don’t; you import.” He says the country is becoming more urbanized, which equals more food demand and fewer resources to produce food. “Now China is trying to buy areas that can produce food,” he says.

10. Global trade

As incomes around the world have increased, especially in China and other emerging nations, Hopper says trade with the U.S. has also increased. While more demand is positive for ag markets, Hopper says this shift has led to stresses on agriculture. “We’ve seen increased commodity price swings and more volatility,” he says.

Written by Sara Schafer, AgWeb.com Business and Crops Online Editor (December 13, 2013)

HOW TO SURVIVE A LONG DAKOTA WINTER

As all of us residents in South Dakota, North Dakota and probably the whole Midwest and even eastern Seacoast would agree, it feels as though this winter has dragged on and we still have at least 4-8 weeks to go.  If you like being outdoors during the late fall and early winter months and the milder days of the entire winter like I do then I would like to recommend some of the following pictured diversions I have utilized to help moderate the current season:

DEER & PHEASANT HUNTING

Hunting #2Hunting #3Hunting #4Hunting

 

 

 

 

 

 

 

 

 

TRAPPING

Traping #2Traping #3Traping #5Traping #6Traping #7Traping

 

 

 

 

 

 

 

 

 

ICE FISHING

Ice FishingIce Fishing #2