Highlights

• Current projection for average CAUV value in 2020 is $665 which would represent a change of -24% from the previous tax year. This is the first year without the “phase-in”.
  • From 2017-2020 a -42% decrease in average CAUV values for counties receiving updates to their property taxes.
• The projection for the average CAUV value in 2021 is $760. The average CAUV value projections could end up as low as $560 or as high as $900.
  • From 2018-2021 a -25% change from the previous triennial update.
• The very early projection for the average CAUV value in 2022 is $880. The average CAUV value projections could end up as low as $665 or as high as $1,010.
  • From 2019-2022 a 1% change from the previous triennial update.

Projected CAUV Expectations

• Non-land costs have trended downward since 2015 and since this component is based off of an Olympic Average of the past 7 years, high values for non-land costs will be dropping out and this component is expected to continue to decrease.
• Prices for corn, soybeans, and wheat have stagnated and are projected at current levels. Component based off of an Olympic Average of the past 8 years (excludes current). High values from 2012 and 2013 are dropping out.
• Yields are based off of the past 11 years (excludes current) and have mostly continued along the path of a 30-year trendline upward.
• Capitalization rate is based on an Olympic Average of the past 7 years which has recently been trending downward. Current Federal Reserve policy is pushing downward pressure on capitalization rate into the future.

Expectations

Expectations

Updates

CAUV Calculation Overview

It is the expected net present value of an acre of land based. To determine this, first a historical average of yields and prices for corn, soybeans, and wheat to determine gross income. Then historical non-land costs – compliments of The Ohio State University Agricultural Extension Agency – are subtracted from gross income for a measure of net income. And finally, this net income is divided by a capitalization rate based upon historical values of farm interest and equity rates. This value will vary based upon the particular soil type(s) for a farm.

CAUV Calculation Overview

• A CAUV value is assigned for each of the 3,514 soil types in Ohio
  • based on their expected yields of corn, soybeans, and wheat from the last state-wide soil survey in 1984
• Value is the expected net present value based on the past 5 to 10 years worth of data for each component
  • Economics jargon, it is the net operating income divided by capitalization rate
• Net operating income is based off of the expected revenue (price times yield) less the expected costs (only non-land costs). Calculated for corn, soybeans, and wheat.
• Capitalization rate is a combination of the interest rate on a loan for purchasing farmland along with appreciation rate of farmland.

Generic Formula

• CAUV is assigned for each soil type, although what really matters is the yields that soil type had for corn, soybeans, and wheat in 1984:

$$CAUV_{s,t} = \frac{NOI_{s,t}}{CAP_t}$$

• where $CAP_t$ represents the capitalization rate and $NOI_{s,t}$ represents the net operating income based on revenues less non-land costs for corn, soybeans, and wheat.
• Net operating income, ${NOI_{s,t}}$, captures the average returns to an acre of land under normal management practices which is adjusted by the state-wide rotation pattern of commodities.

Generic Formula

• ${NOI_{s,t}}$ can be defined as:

$$NOI_{s,t} = \sum_{c} w_{c,t}\times(GOI_{s,c,t} - {nonland}_{s,c,t})$$

• where $w_{c,t}$ represents a commodities share of total harvested acreage
• $GOI_{s,c,t}$ is the expected revenues for a soil type depending on the statewide price of a commodity and yield is a percentage adjustment to the soil’s yield in 1984 for each commodity:

$$GOI_{s,c,t} = Price_{c,Ohio,t} \times \left( \frac{Yield_{c,Ohio,t}}{Yield_{c,Ohio,1984}} \times Yield_{c,s,1984} \right)$$

Non-Land Costs

Prices

Yields

Capitalization Rate

Rotations

Non-Land Costs

Prices

Yields

Capitalization Rate

Expectation

High Range

Low Range

• Farm Office annual crop budget reports https://farmoffice.osu.edu/farm-management-tools/farm-budgets
• Ohio Code of Legislation http://codes.ohio.gov/orc/5713.31 and http://codes.ohio.gov/orc/5715.01
• ODT CAUV Information page https://www.tax.ohio.gov/real_property/cauv.aspx
• USDA-NASS price and yield data https://quickstats.nass.usda.gov
• USDA-ERS total rate of return on farm equity data https://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/data-files-us-and-state-level-farm-income-and-wealth-statistics/
• Projections for 2020 CAUV values are available at https://github.com/rdinter/CAUV/blob/master/3-proj/future/projections_tidy_2020.csv
• Projections for 2021 CAUV values are available at https://github.com/rdinter/CAUV/blob/master/3-proj/future/projections_tidy_2021.csv
• Projections for 2022 CAUV values are available at https://github.com/rdinter/CAUV/blob/master/3-proj/future/projections_tidy_2022.csv