CAUV Projections, 2020 and beyond

Robert Dinterman

2020-06-25

Key Findings

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

\label{fig:cauv-expected}

Expectations

Expected CAUV Projections
Year avg_cauv indx_49 indx_59 indx_69 indx_79 indx_89 indx_99 indx_100
2007 $181 $100 $100 $123 $283 $521 $747 $970
2008 $249 $100 $100 $188 $431 $708 $973 $1,200
2009 $459 $176 $200 $435 $746 $1,059 $1,368 $1,620
2010 $505 $200 $214 $436 $845 $1,278 $1,601 $1,900
2011 $700 $300 $328 $632 $1,126 $1,641 $2,017 $2,380
2012 $719 $350 $363 $610 $1,147 $1,717 $2,128 $2,490
2013 $1,205 $350 $516 $1,218 $1,958 $2,743 $3,310 $3,780
2014 $1,668 $350 $700 $1,778 $2,728 $3,718 $4,428 $5,030
2015 $1,388 $350 $518 $1,371 $2,347 $3,354 $4,104 $4,770
2016 $1,310 $350 $466 $1,235 $2,255 $3,302 $4,074 $4,750
2017 $1,153 $350 $430 $1,061 $1,969 $2,909 $3,602 $4,205
2018 $1,015 $350 $400 $896 $1,723 $2,586 $3,226 $3,810
2019 $873 $350 $378 $725 $1,462 $2,263 $2,855 $3,410
2020 $666 $350 $351 $487 $1,069 $1,777 $2,294 $2,810
2021 $759 $350 $359 $599 $1,254 $1,974 $2,495 $3,000
2022 $882 $350 $380 $769 $1,468 $2,196 $2,724 $3,240

Updates

\label{fig:update-map}

CAUV Calculation

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

\label{fig:viz-nonland}

Prices