Current Ag Financial Climate: Economic Indicators to Watch

2015 Women Managing the Farm

Amy Gales, EVP Regional Agribusiness

CoBank

February 5, 2015

Indicators

Commodity Prices

Interest Rates

Land values & Cash Rent

Domestic Economy

World Economy

Talent

Technology

Risk Management

Financial Management

Indicators to Watch—As you Manage your Farm

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Norwegian Icebreaker

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As you may have seen on the news it's been very cold in the Midwest …..So cold, in fact, that the City Government has borrowed a Norwegian Icebreaker to clear the Mississipppi River for fishing and migrating waterfowl.

December 2013 December 2014

Ec

on

om

y

U.S. real GDP

growth

1.9% 9 months 2013 actual (annualized)

2.5% - 2.9% 2014 forecast

2.7% 9 months 2014 actual (annualized)

3.0% - 3.1% 2015 forecast (IMF & World Bank)

10-yr U.S.

Treasury

3.03%

A new high for 2013

2.17%

Future interest

rates 4.69% January 2019 5-year swap rate forecast 2.79% January 2020 5-year swap rate forecast

Home prices 10% increase projected for 2014 3% - 4% increase projected for 2015

Unemployment 7.00% (November) 5.80% (November)

Inflation 1.31% Core PCE (November) 1.41% Core PCE (November)

Co

mm

od

ity

Pri

ce

s *

Corn $4.28/bu $3.97/bu

Soybeans $13.32/bu $10.19/bu

Wheat $6.09/bu $5.90/bu

Oil (WTI) $98.42/bbl $53.27/bbl

Volatility and Uncertainty Continue

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* Nearby future prices

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* Nearby future prices

Interest Rate Yield Curve

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10 Year Interest Rates

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Interest rate movements have two important impacts on farmland values

Expected

Farm Income

Capitalization

Rates

Farmland

Values=÷Interest

Rates

Sale Price Cash Rent

2006 $1200 $74

2007 $1260 $82

2008 $1450 $92

2009 $1500 $89

2010 $1600 $95

2011 $1900 $105

2012 $2400 $119

2013 $3000 $137

2014 $3280 $126

Kansas Price Per Acre-Irrigated Cropland

Kansas Agricultural Statistical Districts13

Value of the Dollar

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“If I were running a company today, I would have one priority above all

others: to acquire as many of the best people as I could …[because] the

single biggest constraint on the success of my organization is the ability to

get and to hang on to enough of the right people.” — Jim Collins

Talent and Engagement

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“If automobiles had followed the same development cycle as the

computer, a Rolls-Royce would today cost $100, get a million miles per

gallon, and explode once a year, killing everyone inside” ~ Robert

Cringely

Technology

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Information Technology in Agriculture

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Questions?