A View of the Agricultural Industry:

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A View of the Agricultural Industry
from my favorite seat
By Richard Gilmore,ASA,ARA CoBank Risk Managemen
t
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AgFirst RAAW Conference May 2006
So What is going On!
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This is not your Daddys Agriculture or his IH
Model M
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Fairmount N.D. 52,000 Tons
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Agricultural Chemicals And Fertilizers Prices a
re up 30-60 Rebates continue to be the margin in
this business Handlers and facilities continue
to diminish Continued expansion by majors but in
key ag areas and where gains in market share can
be achieved.
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Rugby North Dakota 16,800 Tons
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Caldwell Idaho 16 on the lot
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DAIRY-2006

• Milk price dropping quickly
• Cheese price lowest in three years
• Powder at support price (.83/lb)
• 4 of the operations produce 50 of the milk
• Over 500 cows growing in Ohio, Mich Idaho, Texas

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DAIRY-2006

• Southwest Cheese Clovis New Mexico
• 6 million lbs/day 325 tons of cheese per day
• 8 of the us cheese production
• 24/7/365
• 225 employees
• 16.5 million lbs of whey
• Cheddar, Colby and Jack cheeses

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• Off loads at 3.3 bushels per second

80 bushels/minute
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GRAIN Corn crop was huge this year Current p
rice under 2 Lots of grain on the ground in
the mid west Soybeans Same deal beans 5.00 E
xports have improved Cost price squeeze When
will cash rents decline? 1031 exchange impact on
values over time
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Self Propelled Mixed Greens Harvester
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Specialty Crops

• Consolidation of Market Access
• Contract or loose access to markets
• Margin Compression
• Pay by Scan
• Risk Management
• Organic
• Consolidation of Transportation

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Euro-Fresh 110 acres of glass
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Is This The Future for Ethanol
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Ethanol In 2004, more than 3.4 billion gallons
of ethanol were produced in the U.S. because of
consumer demand Last year there were 82 ethanol p
roduction facilities in the U.S., primarily
centered throughout the Corn Belt.  2004, nearly
half of ethanol plants in the U.S. are
farmer-owned cooperatives. 2005 38 are farmer
owned. Now 95 with 33 under construction with 4.4
mg/y produced last year. 1.7 mg/y additional
9 Expansions of existing plants
ADM building 275 million gallon plant in Nebraska
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Timber and Wood Products

• Timber deconstruction of legacy companies
  providing opportunities.
  
• Consolidation, REITs, Land Trusts
• IP sells 5.1 million acres to investor groups
• Timberlands attractive to institutional investors
  , Hancock, Harvard, Yale, TIMOs
  
• Virginia Paper mill converted to pellet mill
• Export to the Netherlands

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Issues to Watch

• Immigration
• Water I am seeing sales with water rights worth
  more than land value??
  
• Carbon Trading
• http//ecosystemmarketplace.com/pages/static/marke
  twatch.php
  

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Real Estate Observations California, Washington D
.C Massachusetts, Florida Markets are SOFT Buye
rs not buying Sellers not Selling Rates going up
! Where is the Market headed ??
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Real Estate Observations Zillow.com Loopnet.com
Chicago Mercantile Exchange to start futures
contract based on a ten city composite
10-31 exchanges continue to drive rural markets
Ag land preservation increasing
Tighter Governmental Controls via IRS oversight

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National Appraisal Issues
IVSC/WAVO Mark to market, Fair Value Curre
ntly 91,000 appraisers but less
25,000 are affiliated Appraisal Organization Alli
ance State of the Industry Aging
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The Appraisal Foundation

• Appraisal Qualifications Board
• Qualifications to take effect 2008
• New Education 300 hours
• New National Exam to ensure national
  compliance
  
• National Course Approval

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FCS Representation at The Appraisal Foundation
TAF Board of Trustees Kirk Manker- FCS o
f America -Omaha TAFAC The Appraisal Foundatio
n Advisory Council Roger Cramer -NWFCS ECAFS
Educational Council of Appraisal Foundation
Sponsors James Synatske- South Texas ACA
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RAAW 15 members 5 appraisers
Craig Warren- Utah Kirk Manker- Omaha Mickey
Nixon -Texas Hugh Taylor- Florida Mike Gage-W
NY Who Will Be Next???? Will It be You
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CHALLENGES FOR Appraisers Lack of Management role
s in ACAs Need for Development of Management Ski
lls Need for participation on State Boards Port
folio and Risk Management Risk Ratings and LGD F
aster and Cheaper Role in Rural America
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Questions
RGilmore_at_Cobank.com