However, in reviewing the Federal Reserve Bank of Richmond, VA agricultural survey for the third quarter of 2011, it indicated that farmland values for their region (Maryland, Virginia, North and South Carolina and most of West Virginia) had actually declined in value.  The decline from the second quarter of 2011 was 1.5% and 4.5% from the same quarter in 2010.

The survey presented a chart of farmland values from 2002 until 2011 and most farmland values in this region peaked in early 2007 and have not recovered to that value since.  The average price of farmland during the third quarter was $3,263. 

In the fourth quarter survey done by the Dallas Federal Reserve, this region actually had an increase in irrigated land values and dry-land and ranch values held fairly steady.  Even with the drought conditions in the area, most of the bankers are expecting prices to rise over the next three months.

As the saying goes in real estate, “It is Location, Location, and Location”; it is certainly true about farmland prices.  The increase in price depends on where it is located.

At 8:15, my breakout sessions started.  Each one last 55 minutes and were back-to-back-to-back.   I thought the last session would be the smallest, but it actually turned out to be the largest and each session had many good questions (and I think I gave good answers).

Ann Duignan of JP Morgan gave a presentation on how the global economy is affecting the farm machinery business and then its affects on our farmers.  The presentation was very informative.

Last night we had the Top Producer of the Year award dinner.  There were three finalists and based on the video presentation for all three, I could not tell who was going to win.  Each farmer has been very successful and will continue that success.  The one thing that was brought out to me by all three was each of their passion for the employees that work for them.  They are part of their family and it showed.

I think this is the first time that I have ever seen a farmer use a pink flamingo as part of their branding process.

I won’t tell you the winner here since it will be posted on the Top Producer section of www.agweb.com.

America, with the Mississippi River system and inter-coastal waterway has by far the best series of cheap river and water systems in the world.  That is why it is cheaper for an American farmer to ship his corn from Minnesota all the way to New Orleans than for a Brazilian farmer to ship his corn by truck for a hundred miles.

The only other water system that comes close to our is Argentina with three rivers that flow eventually down to Buenos Aries.  Because of this waterway system, Argentina’s standard of living in 1900 was about 90% of ours. 

There was a group panel on where the new farm bill was headed.  Consensus was a bill in 2013, but may still get one this year.  Direct payments will no longer be there and some expanded form of crop insurance is most likely to happen.

The value of peer groups was discussed in the afternoon and I believe that these have great potential value to all farmers.  It is always good to get another opinion that you value and it is much easier to held accountable by a peer.

All in all, the first day of Top Producer was very productive and I had several readers of the blog come up and say hi.  I hope to see more tomorrow and with three back-to-back presentations, I know I will be more tired tomorrow.

The main Top Producer conference begins on Wednesday and goes through Friday morning.  I have three breakout sessions on Thursday morning from 8:15 to noon dealing with tax savings tips, etc.  At the end of the third one, I will be worn out from talking.

I look forward to the conference and please feel free to stop me at any point during the conference to discuss farm accounting, taxes and who will win the Super Bowl.

On another note, we had some technical difficulties with our site yesterday.   The company that hosts the site had an issue with their internal database for our site and many others.  I would like to say it was very nice to be able to actually call and talk to someone in technical support without being on hold for an hour and they got the issue resolved fairly timely, but we were down for most of yesterday, but everything seems to be working just fine now.  Many of these so called hi-tech sites (including Google and others like it) seem to feel that customer support does not involve telephone numbers or talking to a human being over the phone.  It is very refreshing when one does allow this.

For January, the index rose to 59.8 from 59.7 in December which is the highest it has been since June 2007.

Here are some other trends from the survey:

• Bankers expect average farm input costs to rise by 7.2% in 2012
• 9 of 10 bankers do not expect the end of the blender’s tax credit to have a significant negative impact
• More than one in four bankers indicated that a decline in agriculture commodity prices is the biggest economic challenge in 2012
• Almost as many indicated a shortage of jobs and workers was the main economic challenge

After rising to a record level of 84.1 in December, the farmland price index fell almost 12% to 74.3 in January, 2012.  A recap by state is as follows:

• Colorado – Dropped from 88.5 to 78.9
• Iowa – Dropped from 77.1 to 68.2
• Minnesota – Dropped from 76.2 to 57.8
• Nebraska – Dropped from 84.6 to 73.5
• South Dakota – Dropped from 69.4 to 60.1
• Wyoming – Dropped from 84.3 to 73.9

These are healthy drops in the index, however, this drop is based on only one month of data and December can very very skewed with certain sales happening for tax purposes.  It will be interesting to see what the index numbers for February are.

We were curious how many counties in the US had more than $1 billion in farm sales in 2007.  We accumulated the list as follows:

 As you see, California was the most dominant state with twelve counties exceeding $1 billion in farm sales.  California also had a couple of other counties that were very close to the billion dollar level.

Only two other states had at least two counties (1) North Carolina and (2) Washington. 

Our guess is that this list will easily double in the next census to come out later this year.  Several states had at least two to four counties there were in excess of $750 million of farm sales and with the current high prices,we would guess this will push those counties over the $1 billion mark.

We will keep you posted on how the next census numbers end up.

Total 2011 agricultural exports are expected to $137 billion.  This is an all time high with 2008 in second place at $115 billion.  An interesting note is that farm imports were $93 billion which is primarily comprised of fruits, vegetables and coffee.

Of total exports, less than 40% of this is bulk products such as corn, wheat and beans.  Back in the 1970s and 1980s more than 60% were bulk grains.

Our top 5 exporting countries are China #1, Canada #2, Mexico #3, Japan #4, and the EU #5.  Canada had been number 1 for several years until China took over in 2011.

China imports almost 60% of the total world trade in soybeans and almost 40% of cotton.

The share of the US crops that is exported each year is as follows:

• Wheat – 46%
• Corn – 15%
• Rice – 53%
• Soybeans – 47%
• Cotton – 81%

The US share of total world crop exports are as follows:

• Wheat – 18%
• Corn – 53%
• Rice – 11%
• Soybeans – 39%
• Cotton – 35%

The share of livestock that is exported is as follows:

• Beef 10%
• Pork 22%
• Poultry 17%

These percentages are based upon their estimates for 2011-2020.

There is more information that I will share over the next few weeks, but I thought this was informative.  For example, only 15% of our corn crop is exported, however, this makes up about 53% of all corn exports through-out the world.  Also, almost 40% of the soybeans exports come from the US, with most of the remainder coming from South America.

“President Obama’s proposed Jobs Act includes an extension of 100% bonus depreciation through 2012 however excludes qualified real property. Does this include farm buildings?”

 First, I think there is a very good chance that we will see 100% bonus depreciation sometime in 2012.  However, we are dealing with politician in Washington DC and this decision may not get made until after next year’s election.  This is what happened in 2010.  For planning purposes, we currently have 100% bonus depreciation for 2011 and 50% for 2012.  Those are the numbers I would use for now.

For the second question, the qualified real property relates more to retail lease space and restaurant property, etc.  All farm buildings have either a 20 year life or perhaps a 10 year life for structures such as a hog confinement building.  Under the Section of the Code dealing with bonus depreciation, all assets with a life of 20 years or less qualifies for bonus depreciation.  So, the bottom line answer is that farm buildings would qualify under President Obama’s proposal.

The president of International Farming Corporation gave a presentation on their efforts to both create long-term value to their investors and their tenant farmers.  This is a company that has raised about $250 million in funds to be invested in farms around the US with I think the ultimate goal to turn it into a publicly traded REIT.  The management of this company has been involved in farming for about 150 years and has a very long-term focus on farming.  I think we will see more funds like this in the future.

My first break-out session dealt with cash rent versus flexible rent versus crop share rent.  Much discussion was held in this group and sometimes it did get a little bit emotional.  The idea of a flex rent almost brings cash rent back to the equivalent of a good crop share rent.  Another point of the session leaders was that over time, the market will drive profits to farmers to be approximately zero.  This does mean that the farmer will be entitled to return on their investment for machinery and technology and their overhead for management plus some profit on it, but in the long-run cash rents will tend to drive the other profit to zero.  Farmers can either embrace this in their operation or not, but in the long-run, that is where market economics will take it.  Another important point was to be proactively involved in communicaiton with your landlord. 

The last break-out session dealt with the proper use of crop insurance, options and marketing.  I especially enjoyed the farmer on the panel with his discussion of how the integration of crop insurance and options locked in a certain minimum profitable sales price no matter what the production or actual sales price was.  Remember, this is a business and anytime you can lock a good profit with the upside potential of call options should not be overlooked.

Today, I am only at the Summit for about an hour and then head home for our Christmas office party.  Since I have been on the road since Monday, I will be happy to get home.