Farmland

Discussion in 'Real Estate' started by 2forISU, Apr 30, 2018.

  1. DurangoCy

    DurangoCy Well-Known Member

    Jul 5, 2010
    5,485
    738
    113
    Male
    Durango, CO
    Ratings:
    +2,922 / 93 / -0
    Marry a cousin?
     
  2. Clone83

    Clone83 Well-Known Member

    Mar 25, 2006
    4,691
    478
    83
    Ratings:
    +736 / 9 / -6
    There is a lot of good information in this thread.

    With Iowa farmland values peaking a few years ago, I saw retired ISU professor and ag economist/ag lawyer Neil Harl say farmers should consider budgeting for the worst case scenario in planning for the future.

    Also keep in mind that government subsidies get capitalized into the price of farmland.

    In this case, besides the government CRP check, is the increase in corn prices (and resulting higher land values) due to the government paying to take and keep all this land out of production. To give just one other example of a government program affecting Iowa land values, and how so, the sugar program is designed to keep lower cost cane sugar from entering the United States from other countries. This doesn’t help just a handful of Florida sugarcane growers, or just Minnesota sugar beet producers, but also increases the demand for high fructose corn syrup and Iowa farmland prices.

    The OP might consider his or her willingness to ride out a possible continued long period of low corn and soybean prices, and a potential continuing or even steep decline in Iowa farmland values -- which a decent off-farm income might allow. I doubt, however, that the CRP is going away anytime soon. It is politically popular and few understand the economics and history involved.

    Absent a major U.S. fiscal crisis, if farm prices are low, the CRP almost certainly would not be eliminated. If prices were high, it would be easier, but this would also mean your investment increased in value.

    As others pointed out, low crop prices might mean the CRP payments are not as high.
     
  3. Clone83

    Clone83 Well-Known Member

    Mar 25, 2006
    4,691
    478
    83
    Ratings:
    +736 / 9 / -6
    #123 Clone83, May 6, 2018
    Last edited: May 6, 2018
    What nfrine said, and the understanding of those not on the receiving end of the payment, is perfectly reasonable.

    The Conservation Reserve Program was enacted in 1985 to:
    1. Pay farmers to take a massive amount of farmland out of production for an extended period of time to support crop prices and farmland values, and

    2. Target the land taken out of production to where it would provide the greatest good from a conservation standpoint.
    To be fair, much of this land would not have been brought into production in the first place but for previous government interventions — like price supports for certain crops like corn and wheat, first put in place during Henry A. Wallace’s time in office. Bringing the most marginal crop ground into production, and then getting paid to take and keep it out of crop production, is basically what the government encouraged.

    If the CRP were ended, some of this land would go back into the production of program crops, putting downward pressure on the prices for corn and soybeans, and associated land values. This openly acknowledges one of its purposes, which, judging by this thread, seemingly few involved in agriculture are wont to do. Or it might be used for other crops, such as hay or alfalfa, or simply used for grass or pasture for livestock, or timber, that are better for soil and water conservation. Or the land could just lie fallow, without any government payment involved whatsoever. Or perhaps used for more residential or recreational or other non-agricultural purposes. Aren’t some southern Iowa counties at the 25 percent of land maximum allowed in the CRP? It seems to me that there would be much higher Iowa cattle production, cow-calf specifically, and that of other livestock, and relatively less in confinement, if the government wasn’t paying to keep this land out of production -- which tends to prop up corn and soybean prices for crop farmers -- and to increase feed costs for livestock producers.

    All that said, relative to just a few years ago, perhaps the biggest development putting downward pressure on Iowa farmland values is the reestablishment of the United States as one of the world's premier oil and gas producers — a market driven development in response to higher market prices for those products.

    Ethanol IMHO would almost certainly never be more than a niche product in any case, even cellulosic. And although oil prices are increasing globally right at the moment, it isn’t as if other U.S. energy producers aren’t far more price and output competitive than they were just a few short years ago.

    In the late 1970s people thought that U.S. agriculture was entering a new period of worldwide shortages and market- rather than government-driven prices. All of the excess U.S. production was expected to be sold internationally. The direct payment program in place at that time paid farmers the difference between a “target” price and the market price. It was as if USDA economists could set target prices slightly upsloping over time, with a 12-inch ruler, since they were below the market prices, and weren’t expected to come into effect anytime soon. People were wrong. The high market prices encouraged new technology and production in other countries. The target prices were always relevant, because they provided a baseline that crop farmers could budget by. U.S. market prices crashed below the target prices. There was a massive overproduction problem. In one or more years IIRC the stocks at the beginning of the production year were about equal to the prior year production. I think PIK, or payment in kind, was in 1983. The government basically offered to pay corn producers with the prior year’s crop to not produce that year.

    The CRP helped take a lot of this overproduction off the market, and in more recent years ethanol production has.

    It seems now that ethanol will not reduce overproduction nearly as much as many expected.
     
    • Informative Informative x 1
  4. Stormin

    Stormin Well-Known Member

    Apr 11, 2006
    40,168
    1,159
    113
    Ratings:
    +6,222 / 427 / -43
    • Informative Informative x 1
  5. farminclone

    farminclone Well-Known Member

    Nov 16, 2009
    5,778
    956
    113
    Ratings:
    +5,662 / 317 / -33
  6. Stormin

    Stormin Well-Known Member

    Apr 11, 2006
    40,168
    1,159
    113
    Ratings:
    +6,222 / 427 / -43
    The way I understood things is that lenders like Farm Credit had to write down the debt and then finance the broke farmer at pretty decent interest rates. In one instance the farmer owed $3,000 an acre. They wrote the debt down to $1,500. Financed him for 5% for 5 years. Pretty sweet deal how they rewarded those bankrupt farmers. Brother Monte was in hock up to his eyeballs.
     
  7. istater7

    istater7 Well-Known Member

    Mar 31, 2010
    4,495
    164
    63
    Ratings:
    +743 / 57 / -1
    If you don’t want to deal with any hassle, look at working with a farm management firm. Makes things next to worry free for you. Land is a great investment.
     
    • Informative Informative x 1
  8. mtowncyclone13

    mtowncyclone13 Well-Known Member
    SuperFanatic SuperFanatic T2

    Oct 10, 2012
    19,907
    2,152
    113
    grundy center
    Ratings:
    +9,294 / 549 / -23
    180 acres for sale near me and the assessed value is $154,000 and they are asking $650,000.

    Funny how people think ag taxes are too high but they are paying taxes on less than one-fourth of the value.
     
  9. BCClone

    BCClone Well-Known Member

    Sep 4, 2011
    28,231
    4,592
    113
    Male
    North Iowa
    Ratings:
    +22,671 / 677 / -3

    You do understand how ag land is not taxed according to his value is taxed according to his productivity?
     
  10. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
    19,823
    1,340
    113
    Male
    Ratings:
    +13,075 / 3,014 / -1,854
    Oh yeah, farmers definitely negotiated well on those assessments. Assessed value of farmland is useless for anything other than calculating their taxes. It hurts rural Counties, if you think that less money to the government is bad (which I don't).
     
  11. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
    19,823
    1,340
    113
    Male
    Ratings:
    +13,075 / 3,014 / -1,854
    Only because no one would be able to farm if it was taxed like housing. They've just figured out what amount of money can they extract without killing the activity.
     
    • Agree Agree x 1
  12. BCClone

    BCClone Well-Known Member

    Sep 4, 2011
    28,231
    4,592
    113
    Male
    North Iowa
    Ratings:
    +22,671 / 677 / -3
    Most people don’t pay attention at houses are rolled back 50% also.
     
  13. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
    19,823
    1,340
    113
    Male
    Ratings:
    +13,075 / 3,014 / -1,854
    Farmland is also rolled back. It would make more sense to assess the land at close to a market value and then use a rollback.

    https://tax.iowa.gov/sites/default/files/2019-10/2019AssmtLmtOrder.pdf

    IT IS HEREBY ORDERED by the Department of Revenue of the State of Iowa that each county auditor shall apply the following percentages to the 2019 actual value of the following properties:

    1) 81.4832% to the value of agricultural realty outside and within incorporated cities and towns in the county, excluding dwellings located on agricultural realty.

    2) 55.0743% to the value of residential realty outside and within incorporated cities and towns in the county, including dwellings located on agricultural realty.

    3) 90.0000% to the value of commercial realty outside and within incorporated cities and towns in the county.

    4) 90.0000% to the value of industrial realty outside and within incorporated cities and towns in the county.

    5) 71.2500% to the value of multiresidential property outside and within incorporated cities
     
  14. BCClone

    BCClone Well-Known Member

    Sep 4, 2011
    28,231
    4,592
    113
    Male
    North Iowa
    Ratings:
    +22,671 / 677 / -3
    I know but was just pointing out that houses aren’t taxed at full value.
     
  15. mtowncyclone13

    mtowncyclone13 Well-Known Member
    SuperFanatic SuperFanatic T2

    Oct 10, 2012
    19,907
    2,152
    113
    grundy center
    Ratings:
    +9,294 / 549 / -23
    the property tax system is dumb.

    they should have a value and tax that value instead of having a value, a rollback, and then a tax on that rollback. they needlessly add another step.
     
  16. Cycsk

    Cycsk Well-Known Member
    SuperFanatic SuperFanatic T2

    Aug 17, 2009
    21,278
    2,133
    113
    Ratings:
    +7,192 / 327 / -6

    81.4832%
    55.0743%

    Is it really necessary to go to four digits past the decimal?
     
  17. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
    19,823
    1,340
    113
    Male
    Ratings:
    +13,075 / 3,014 / -1,854
    It's a game to guarantee they can get MOAR each year regardless of small things that happen. More variables = more confusion for the average person and more flexibility.
     
  18. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
    19,823
    1,340
    113
    Male
    Ratings:
    +13,075 / 3,014 / -1,854
    Not in the least. And those change every year so just imagine the committee, lobbyist, and lawyer time that goes into nailing it down to that 4th decimal.
     
  19. CTTB78

    CTTB78 Well-Known Member

    Apr 7, 2006
    9,440
    997
    113
    Ratings:
    +4,710 / 249 / -4
    The attorney that I'm working with closing out the sale of my parents trust/land told me he had two farm auctions in NW Iowa last week. Could not get one bid on either farm. Yikes.
     
    • Informative Informative x 1
  20. twojman

    twojman Well-Known Member

    Jun 1, 2006
    5,872
    347
    83
    Male
    Being awesome
    Clive
    Ratings:
    +1,219 / 112 / -7
    I think a bit of that has to do with current coronavirus issues. I also tend to think farmers are not in a great place with tariffs etc. If you could do it, rent out the land for this season and sell in a year? Things will most likely very different in a years time.

    I say this as a person that has always lived in 'town' or suburbs. I have relatives that farm but don't get to see them a whole lot.
     

Share This Page