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Ag Land Productivity Formula Catching Up with Crop Price Slump

The agriculture productivity assessment formula is finally catching up with the multi-year slump in crop prices and offering some farmers some relief from rising ag land valuations for taxes.

So says the data presented at Tuesday’s meeting of the Legislature’s Agricultural Land Assessment Task Force in Pierre. Legislators and other task force members received tables on crop prices from 2000 through 2017. Many crops drew some of the lowest prices in the last decade:

  • Corn: $3.00 per bushel, down 20 cents from last year, lowest since 2006.
  • Flaxseed: $8.85 per bushel, up 85 cents from last year, but otherwise lowest since 2009.
  • Sorghum: $5.30 per bushel, up 50 cents from last year, but otherwise lowest since 2010.
  • Soybeans: $8.90 per bushel, down 20 cents from last year, better than $8.40 bushel in 2015, but otherwise lowest since 2006.
  • Sunflowers: $0.167 per pound*, up one tenth of a penny from last year, but otherwise lowest since 2009.
  • Sunflower seed for pound*: $0.172 per bushel, seven tenths of a cent up from last year and better than $0.171 in 2015, but otherwise lowest since 2009.

Our new ag property tax formula enacted in 2010 shifted the taxation of farmers and ranchers from the guesstimated sale price of their land to its productive value. One would thus think that when the value of their production dips as significantly as it has in the last five years, the formula would say, “Those farmers made less money, so they’ll pay less tax,” which is pretty much what happens for us regular folks when Uncle Sam taxes our actual productive value each year as shown on our W-2s and Schedule Cs.

But that’s not how our formula works. We take an Olympic average of each farmland’s productive value, meaning that after some econ profs project potential  productivity based on crop prices, soil type, and other factors, we take those values for the last eight years, throw out the lowest value and the highest value, and take the average of the remaining six.

According to another Ag Land Assessment Task Force table, that Olympic averaging, which combines the boom prices of roughly 2010–2013 with the subsequent slump, still produced increases in statewide productivity values in the 2016, 2017, and 2018 assessment years. But now for the 2019 assessment year, which will use Olympic averages from 2010 to 2017, the statewide productivity assessment for crop lands will tick down 0.10%.

Crop Olympic averages will drop in 26 counties. The biggest declines are in Meade County (–5.58%) and Perkins County (–5.45%). Crop Olympic averages will remain unchanged in 16 counties and increase less a half a percentage point in eight more counties. Among the sixteen counties experiencing increases of more than 0.5%, the highest crop productivity valuation increases will be in Dewey County (+7.40%) and Oglala Lakota County (+4.66%).

It still seems like an awful lot of work to go through to tax farmers on what they maybe made three or five or seven years ago and what they might make this year the soil and sun and rain produce what some formula says they could on certain crops that they might or might not plant. It seems it might be a lot more straightforward to ask those farmers and ranchers, “Hey! How much did you make last year? Great. Send us 3%.” But I suppose that would just be laziness or Communism or some such evil.

Correction 2018.07.13 07:32 CDT: I originally listed the sunflower and sunflower seed for oil prices as per bushel. As experienced farmer Nick Nemec pointed out below, I had set my typing on cruise control and failed to notice that the committee tables give sunflower prices per pound. I regret the unit error.

19 Comments

  1. Greg 2018-07-12 19:25

    Cory , where did you come up with those prices for soybeans and corn? Todays local market for soybeans is $7.55 and corn $2.87.

  2. OldSarg 2018-07-12 19:37

    His prices are so far off it is clear he never looked up a single one. Sunflowers are over $17.00 a bushel. Every item he mentioned above was so low it is an insult to anyone who can read and google. . .

  3. mike from iowa 2018-07-12 19:51

    You’d never ever guess OldSferbrains is totally wrong some more. Doesn’t seem possible he can be that lost all the time. Notice where it says sunflowers are priced per hundredweight. Know what that means, OS?

    Daily Oilseed Sunflower Price Averages
    Home » Growers » Marketing » Daily Oilseed Sunflower Price Averages

    Daily Oilseed Sunflower Price Averages
    The tables below include running averages of the prices at each of the three located crushing plants: Fargo and Enderlin, North Dakota and Goodland, Kansas. You can see prices for a specific date. This is provided for farmers who are watching for potential changes in the loan deficiency payment (LDP) and for others who are looking for recent price history. Sunflowers are priced per hundred weight (CWT).

    NuSun Oilseed Average Prices

    Date Enderlin ND Fargo ND Goodland KS
    5/9/2018 $17.80 $17.90 $17.10
    5/10/2018 $17.80 $17.90 $17.10
    5/11/2018 $17.80 $17.90 $17.10
    5/14/2018 $17.80 $17.90 $17.10
    5/15/2018 $17.80 $17.90 $17.10
    5/16/2018 $17.70 $17.90 $17.00
    5/17/2018 $17.80 $17.90 $17.10
    5/18/2018 $17.90 $17.90 $17.20
    5/21/2018 $17.90 $17.90 $17.20
    5/22/2018 $18.00 $18.00 $17.20
    5/23/2018 $18.00 $18.00 $17.20
    5/24/2018 $18.00 $18.10 $17.20
    5/25/2018 $18.10 $18.10 $17.20
    5/29/2018 $18.10 $18.15 $17.20
    5/30/2018 $18.10 $18.15 $17.20
    5/31/2018 $18.10 $18.15 $17.20
    6/1/2018 $18.10 $18.15

  4. mike from iowa 2018-07-12 19:58

    This is cash bids posted by Watertown Watertown for area elevators-

    Local Cash Bids

    Watertown Delivery Basis Cash
    Corn Chart July -0.48 2.97
    Beans Chart July -0.82 7.51
    Sp. Wheat Chart July -0.22 5.08
    OATS Chart July 0.12 2.53
    W Wht Chart July -0.10 4.71
    WEBSTER Delivery Basis Cash
    CORN Chart July -0.60 2.85
    BEANS Chart July -0.95 7.38
    SP WHT Chart July -0.37 4.93
    OATS Chart July 0.07 2.48
    W Wht Chart July -0.24 4.57
    HENRY Delivery Basis Cash
    Corn Chart July -0.53 2.92
    BEANS Chart July -0.85 7.48
    SP. WHEAT Chart July -0.30 5.00
    Oats Chart July 0.07 2.48
    W WHT Chart July -0.18 4.63

    Price as of 07/12/18 07:56PM CDT.

  5. Edwin Arndt 2018-07-12 20:27

    Cory, the sunflower seed price you quote is way off. I suspect Mike is pretty much right.
    .176 per bushel? We have not raised sunflowers since 1998, but the accepted test weight
    for sunflowers at that time was 28 lbs. per bushel. In most cases the test weight was 30 to 32
    lbs. per bushel. In 1987 the test weight was around 38 lbs. per bushel. At any rate, here is the
    math: .176 per bu. /28=.0062857 per pound x 100=.62857 per cwt. Roughly .63 per cwt. If you
    raise 2000 lbs. an acre that would be 20 cwt. x .63= 12.60 an acre, which is laughable.
    Cory, I don’t blame you, you likely used the published info. But if that is what the task force
    was using, it’s no wonder farmers don’t trust government.

  6. Cory Allen Heidelberger Post author | 2018-07-12 21:33

    Now Edwin, if you’d like to make a point about the reliability of the data the state is using to guide the calculation of productivity values for taxation of land, by all means, have at it. If you can show that the crop price data for 2017 that the state presents and that I faithfully report is in error and that farmers are about to see their land misvalued and mistaxed, hurry up and do so. Piling bogus data into a byzantine formula is all the more reason to convert to a simpler, more straightforward, more honest system of taxation—i.e., taxing agricultural landowners based on the actual amount of wealth that land generated for them in the preceding year.

  7. jerry 2018-07-12 21:45

    Sounds like a state income tax would be the most fair to all concerned…Even more so today.

  8. Nick Nemec 2018-07-12 22:01

    Good grief guys calm down. The link Cory provided listed the “production unit” for sunflowers as “pound” and the “price per unit” as $.172 for year 2017. Not that far off, but it’s about $.01 higher than todays cash price in Harrold, SD. Cory got a little ahead of himself transcribing prices off the charts provided and listed sunflowers as per bushel like every other grain in the chart while in reality they are the only one priced per pound.

    The bigger issue is that thanks to our economically illiterate president and the trade war he has decided to fight prices for most crops have tanked. Cash price for soybeans in Harrold is $7.35/bu today, corn is $2.84/bu. Soybeans are down about $2/bu and corn is down $.51/bu in just under two months. Thanks Trump.

  9. T 2018-07-12 22:22

    Ch excellent article
    Knew exactly where it figures can
    From
    Asking us farmers (being facetious )
    Our income to pay a tax would bankrupt our state worse than Kansas is right now (Kansas squeezing Ag for
    Every penny they don’t have)
    Jerry has the only solution state income tax

  10. T 2018-07-12 22:26

    These tariffs are hurting farmers and also individuals and look at the Missouri company that Has laid off employees and their nail business because of steel prices This is only the beginning
    And some way or another it will affect all of us and economy

  11. Kathy Bergquist 2018-07-13 05:43

    I have a question, OldSarg, how lazy are you? Really, how lazy are you? Are you illiterate? Do you only dictate to someone who can read and write to post for you?

  12. Greg 2018-07-13 06:23

    State sales tax receipts will decrease dramatically. I talked to a farm implement dealer yesterday and earlier this year he thought he would have a better year than the last few. Now he says it looks like the worst year ever. No big items are moving.

  13. mike from iowa 2018-07-13 07:08

    Every item he mentioned above was so low it is an insult to anyone who can read and google. . except for stable geniuses Drumpf and OLdSferbrains.

  14. Cory Allen Heidelberger Post author | 2018-07-13 07:31

    Whoops! Good point on units, Nick! I’ll fix that right away!

  15. Cory Allen Heidelberger Post author | 2018-07-13 07:39

    Seems like no matter what tax method we choose, the Trump trade war is going to hurt South Dakota state revenues. Farmers buy less stuff—less sales tax. Farmers produce less or get crappier crop prices—less ag land tax eventually when the Olympic average kicks in. Farmers make less profit—less income tax. I understand the stabilizing effect of the complicated ag formula, but I’d hate to have to pay higher income tax based on my last three years of good income when I hit a personal recession year. We should capture wealth when taxpayers have it, give them a break when they don’t (because doesn’t taxing the crap out of people when their income declines only reinforce the recession?), and find other ways at the state level to stabilize our provision of public goods and services during hard economic times.

  16. Clyde 2018-07-13 08:34

    No mention of beef prices…..we are being taxed on pasture land at a rate equal to crop land and the rental price for an acre of pasture shouldn’t be more than the land tax price.

  17. Nick Nemec 2018-07-14 08:57

    Clyde, based on my tax notices and assessments I have to conclude the assessment is based on soil types and what could theoretically be grown on certain types of soil. The formula ignores the improvements a farmer must make to the land to achieve top theoretical yields. Without expensive improvements like breaking the ground and picking the rocks top yields are impossible. Farm land seems to be the only part of real estate where assessments are made without respect to improvements to the property.

  18. Cory Allen Heidelberger Post author | 2018-07-15 17:46

    Nick, they don’t count rocks in the productivity formula? :-)

Comments are closed.