Assume typical crop mix- Plug in Helming prices (pessimistic)- Income Costs- Capitalization factor used (amortization factor of 35 year loan at 10% interest)- PV = Est. LL. Net Income .1036- Production value typically 55 – 60% of market valueCommercial banks use a slightly different system to give them a valuation rate for farm real estate productivity. This rate is the annual expected per acre income return to the land owner (after property taxes and all other owner-related expenses are subtracted) divided by current average value per acre. In the vernacular of the financial world this is ROA (return on investment). In the terminology of agricultural real estate appraisal, this is referred to as the market-derived capitalization rate. Any capital gains (or losses) accruing to the real estate parcel are not included in this estimate. Survey reporters provide this estimate for the three general land classes: irrigated cropland, dryland cropland, and grassland. Estimated annual net rates of return for the current decade are presented in the following table:Type of Land and YearAgricultural Statistics DistrictState AveNorthwestNorthNortheastCentralEastSouthwestSouthSoutheastPercent Irrigated Land:1990 1991 1992 1993 1994 1995 1996 1997 1998 19998.3 8.7 6.8 6.6 6.9 6.6 6.7 7.2 6.7 6.09.3 8.0 6.5 6.0 6.5 6.8 6.3 7.0 6.7 5.96.9 6.8 6.6 6.5 6.3 6.5 6.9 7.0 6.0 5.96.8 6.5 6.6 6.1 6.3 5.9 5.8 6.0 5.8 5.36.7 6.4 6.0 5.7 5.6 5.3 5.2 5.3 5.0 4.66.3 6.4 6.5 6.5 6.2 5.9 6.5 6.7 6.6 6.16.3 6.2 6.0 6.5 5.7 6.0 6.2 6.3 5.7 4.96.0 5.9 6.1 6.0 5.7 5.0 5.4 5.7 5.4 5.07.1 6.9 6.4 6.2 6.2 6.0 6.1 6.4 6.0 5.5Dryland Cropland:1990 1991 1992 1993 1994 1995 1996 1997 1998 19996.2 5.9 4.8 5.0 4.5 4.2 4.1 5.1 4.5 4.36.3 5.0 5.0 4.3 5.2 6.0 5.0 5.8 5.5 4.95.9 6.0 5.6 5.8 6.0 6.2 6.3 6.4 5.8 5.46.4 5.9 5.9 5.7 5.4 5.3 5.6 5.6 5.3 5.15.9 5.8 5.7 5.3 5.2 5.2 5.0 5.3 4.8 4.54.7 4.7 5.6 5.3 5.2 5.1 5.3 5.3 4.8 3.96.1 6.1 5.2 6.1 5.3 5.4 5.5 5.4 ...
