Lesson 1: Land Value Trends and ... - Iowa State University



LAND VALUE

AND PURCHASE

Prepared by: Michael D. Duffy, extension economist, Iowa State University, Ames, Iowa.

Lesson 2: Using Soils Information

Overview

Understanding the soils information on a parcel of farmland is very valuable in making the land purchase decision. Once a farm is located, the next task is to obtain a detailed soil inventory as to what different soils are on the farm and how they can be used. The soil inventory should include the physical resources such as topography, drainage, degree of erosion, slope and climate. Intended use, such as permanent pasture, should be distinguished from cropland acres.

Soils map

Productivity of land represents the key reason behind the soil inventory as it transfers the contribution of the different physical resources into a land value. Productivity is one of the key factors which makes one farm more valuable than another. A soils map can be used as a systematic evaluation of the whole farm. Remember, attention should be given to all parts of the farm.

The amount of information on the soils map will vary with the importance of the different features of the farm. A desirable method of making the map is to divide a farm into soil areas of uniform crop producing ability. Each of the soil areas may then be evaluated by rating them in terms of the most important crop grown. Two steps are involved: the first, determining the boundaries of the soil areas; and the second, estimating the yields for each area.

The soils map should include slope variation, degree of erosion, and details about the drainage system. These are important features to note on the map as they have a definite effect on the long-term productivity of the farm. In fact, the purpose of the soils map is to present a picture of all significant physical features which enhance or limit the producing ability of a tract of land. This is especially true in regards to conservation compliance requirements.

Topography

Topography deserves a large share of the evaluator’s time. Besides being a key to the water erosion hazard, topography gives an indication of soil and drainage conditions and determines the appropriate farming practices.

Topography, in many instances, will help in identifying the soil type. A study of soil survey maps indicates that many soils are formed and exist only under certain topographic conditions. There are, for example, soil types that occur only on level upland, and others that occur only on terraces or bottom land.

It is desirable to follow a definite and uniform system of measuring topography. The usual divisions are level, undulating to gently rolling, rolling, strongly rolling and steep. This

classification is subjective as the term “rolling” to one person may mean “gently rolling” to another. A classification system using “percentage of slope” can eliminate misunderstandings between individuals. Percentage of slope is the number of feet rise in 100 feet of horizontal distance. A slope of zero percent is level or horizontal. A 20 percent slope is a 20-foot rise in 100 feet of distance. Soil maps are available on the Iowa State University extension website.

Erosion

Erosion consists of two main types, erosion by water and erosion by wind. Water erosion is divided into the three subtypes of sheet, rill and gully erosion. Sheet erosion is described as the removal by water of more or less an even amount of soil surface from an area of land. Instead of the soil washing away in spots, it is carried away as a sheet from the surface area. Unfortunately, this type of erosion is not readily noticed and much damage may occur before the producer is aware of what is happening. Rill erosion produces rills or small channels as the soil is carried away by water. Usually, rill erosion results from a heavy rain, particularly in the spring when soil is being tilled. During the spring, there are few, if any, plants with extensive root systems and protection from crop residue has been reduced by tillage.

Gully erosion is where water cuts a small rill or channel into a ditch that is difficult to cross with farm machinery. Gullies usually are formed in a natural drainage way. Although gully erosion does not cover as much area as sheet or rill erosion, the gullies themselves can be viewed as an obstruction resulting in a substantial decline in the value of the land. When they become numerous in a field, it may

restrict cropping use and could in time require permanent seeding into grass.

Wind erosion is, as its name indicates, the removal of soil by the action of wind. The action of wind can affect the productivity of land. Wind erosion usually carries the smallest particles for many miles, but may move the large participles only a short distance. Thus, a loam soil can through time actually be changed to a sandy loam if the wind blows away enough silt and leaves the heavier sand particles behind.

Drainage

Topography and erosion can be easily seen by the eye, while drainage, although just as significant in many cases, is often hidden in such a way as to escape the eye of the potential buyer. The evaluator’s first concern about drainage is to determine how much water the farm is likely to receive annually. Attention should be given to the amount of rainfall during the entire year as well as that likely to come in any one month. Also make note of the amount of water that will drain onto the farm from adjacent farms.

Not all soils are easily drained and drainage problems can make the difference in land value between two soil types in the same area. To determine whether a soil is easy or difficult to drain, examine the texture of both the surface soil and the subsoil. A subsoil with a tight, impervious layer will, of course, prevent water from going down or coming up. A sandy subsoil, on the other hand, usually allows the water to pass through too fast for the good of the plants.

Climate

Only those factors which might vary on an individual farm have been considered up to

this point. The climate’s effect on yields is not likely to vary within a farm, but the effect between farms is often of consequence and over a wide territory it could be decisive. The climate includes items such as precipitation, evaporation, length of day, length of frost-free season, temperature variation, hail and winds. Each of these items can be further subdivided. For example, precipitation could be divided into annual average rainfall, distribution by month, variability from year-to-year, frequency of hard rainfall, and average rainfall during the crop season.

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Rainfall is probably the most important climatic factor influencing yield in the Midwest. The amount of rainfall during the critical months of the crop season in some cases may be more significant than the total annual precipitation. Historical weather records can be used in reviewing the influences of the climate on crop production. The danger of unfavorable weather occurrences is one of the major concerns in crop production.

Using Soil Surveys

County soil survey reports will provide much of the information needed in making a soil inventory. These published reports provide a systematic approach to classifying soil properties and characteristics as they occur in nature. The soil survey represents an effort to communicate soil facts and land use alternatives as viewed by soil scientists. In the reports soil scientists delineate soil boundaries on aerial photo sheets and show the distribution of different soils across a landscape. These soil maps represent an inventory of the soil resources of the area surveyed. An example soil map of a 110.7-acre farm is shown in Figure 1.

The soil inventory is recorded on the map sheets as soil mapping units. For example, the soil map unit symbol 394C2 identifies the soil type, the slope and the erosion phase. The 394 identifies the Ostrander Loam soil type, the C a slope of 5 percent to 9 percent and the 2 represents a moderately eroded soil.

Table 1 lists some of the soils information which can be gathered about this farm from the soil survey report. Listed are soil mapping symbols, soil type, degree of erosion, Corn Suitability Rating (CSR), and yield potential for the most often grown crops. Using this information will help evaluate the expected productivity of the farm.

It is important to remember that the average yields apply to average conditions. These may or may not be reflective of yields the individual producer could expect. The average yields are useful for relative comparisons but for income determination individual producers may want to adjust them to reflect their own management capabilities.

County soil survey reports contain a wealth of information concerning specific soil properties and characteristics of each kind of soil in a survey area. Information about soil texture, percent organic matter, permeability ratings, soil structure and potential soil erodibility factors are examples of soil characteristics described in these reports.

Corn Suitability Rating

The Corn Suitability Rating (CSR) is an index procedure developed in Iowa to rate each kind of soil for its potential two-crop productivity. Soil profile properties and weather conditions are the dominant factors which affect soil productivity. The CSR index provides a relative ranking of all soils mapped in Iowa based on their potential to be used for crop production. This index can be used to rate the potential yield of one soil against that of another over a period of time.

The CSR considers average weather conditions as well as frequency of use of the soil for row-crop production. The ratings range from 100 for soils that have no physical limitations, occur on minimal slopes, and can be continuously row-cropped to as low as 5 for soils with severe limitations for producing row crops.

The CSR index assumes: (a) adequate management, (b) natural weather conditions (no irrigation), (c) artificial drainage where required, (d) soils lower on the landscape are not affected by frequent floods, and (e) no land leveling or terracing. The CSR for a given field or farm can be modified by sandy spots, rock outcroppings, field boundaries, wet spots, and other special soil conditions.

Calculating Average CSR Value

Corn Suitability Ratings can be used with soil maps to calculate a weighted average CSR value for any sized tract of land. A soil map of a 110.7-acre farm located in Northeast Iowa is shown in Figure 1. Calculation of a weighted average CSR value for the tract can be made by multiplying the CSR value for each soil type by the number of acres of each. For example, the 84, Clyde Soil, has a 75 CSR index rating which is multiplied by 17.0 acres to give 1,275 index points. The CSR values for the other soil types are multiplied by their corresponding acreages to yield a composite score of 8,299 points. The total points are then divided by the number of acres to give the weighted average CSR value of 75 for the farm (8,299 ÷ 110.7). The various soil types and CSR ratings for the example are found in Table 1.

Special soil symbols can be added to identify soil areas less than two acres in size which vary significantly from the soil mapping unit in which they occur. Many of these symbols indicate hazards or features that detract from the optimum use of the land and must be considered in evaluation of the tract. For example, the D symbol (Figure 1) indicates there are severely eroded spots on this farm.

CSR Versus Yields

Crop yields for a given soil type are expected to change while the CSR values should remain relatively constant in relation to one another through time. The CSR’s are based upon soil properties, average weather, and the inherent potential of each kind of soil for corn production. The Corn Suitability Ratings are specified for average management and assume that technological advances are applicable to all soils.

The yield estimates listed in Table 1 are based on a high or an above average level of management. This level of management includes an implicit assumption that soil conserving activities on sloping lands are part of the management practices used to obtain these high yields. Factors that determine crop yields for a specific crop are soil properties, topography, weather and management. Yields are usually normalized for a five- or ten-year average.

A comparison of the CSR values and estimated corn yields for different slope and erosion phases of the Kenyon soils is shown in Table 1. Note the differences in the CSR value and corn yield on the Kenyon soils, 2 to 5 percent slope, (83B) and the 5 to 9 percent slope moderately eroded (83C) land. The CSR value changes from 85 to 70 while the estimated corn yield changes from 159 to 149 bushels.

The difference in CSR implies fewer inputs will be required to achieve an average yield of 159 bushels per acre on the 2 to 5 percent slope land compared to the inputs required to achieve 149 bushels per acre on the 5 to 9 percent slope land. The additional inputs required on the steeper sloping soil may include agronomic and engineering practices such as conservation tillage, contour farming, a crop rotation that includes a grass or legume crop with row crops, conservation structures, and above average application of fertilizers.

The changes in CSR value by 15 points implies a need to conserve the soil on steeper slopes for maintenance of its long-term productivity. Also, when CSR and yields are compared, do not expect a linear one-to-one relationship among different slope classes and erosion phases for the same kind of soil.

The task of establishing weighted average CSR’s, soil types, etc. can be rather laborious. Today there are other options available to the potential buyer. Most County Assessors have detailed maps available. There are also commercial services available that can provide the information for a fee. And, there are real estate brokers and appraisers who can provide this information.

Soil Productivity Approach to Yields

Establishing realistic yield levels for a tract of land is very important in the land purchase decision. A yield level too high leads to overoptimistic returns, thus overstating the long run earning potential of the farm. Likewise, too conservative of yield levels understates the earning potential of the farm and raises the possibility of a missed purchase opportunity.

Using the soil productivity approach is one method of determining potential yield expectation for a tract of land. This approach requires three critical pieces of information for calculation of a weighted acreage yield of the land being evaluated. First, a soil map is essential with the various soil map units outlined.

Next, the yield potential for each different soil map unit must be determined. These estimates can be found in the soil survey reports, however, yields in older soil surveys may need to be updated. Estimated yields for major crops grown in Iowa have been established for more than 1900 soil map units which are identified in the modern soil survey reports. These yield estimates are available at the various County Extension Service and Soil Conservation District Offices.

Third, the acreage of each soil in the field must be estimated or measured and recorded on a worksheet. A dot grid transparent overlay can be used to estimate acreage for each soil delineation. The estimates of acreages for the 110.7-acre farm are included in Table 1.

The final step is calculation of the weighted average yield for the various crops to be grown on the farm. This is accomplished by multiplying the various yield potentials and the corresponding acreage for each soil map unit. The sum of these products is divided by the total acres in the farm to give the weighted average yield for each crop. The calculated weighted average yields for the 110.7-acre farm are: Corn, 145.2 bushels; soybeans, 44.3 bushels; oats, 86.9 bushels; and alfalfa, 5.6 tons (see Table 1).

A. Calculate the weighted average yield for the field listed below.

|Soil Type Name |Soil Map # |Acres |Corn Yield|Soybean |

| | | | |Yield |

|Nicolett loam |55 |20.7 |156 |50 |

|Storden loam |62C2 |7.2 |123 |39 |

|Harps clay loam |95 |13.9 |125 |40 |

|Coland clay loam |135 |3.2 |136 |44 |

|Clarion loam |138B |10.5 |145 |46 |

| |Total Acres |55.5 | | |

Using Historical Yield Data

Records of actual farm yields or average county yields can be helpful in establishing yield goals for a farm. When using production records, a minimum of five years of record data should be used. Average historical records can be used as a cross-check for the yields determined by the soil productivity approach. Although individual farm yield records are preferred, in most cases they are not available, making county yield information the best source of data for estimating yields.

Table 2 shows average yield data in Butler County for corn, soybeans, and oats. The yield data was obtained from the Iowa Crop and Livestock Reporting Service. The five-year and ten-year average yields are shown towards the bottom of the table. Also included are the median yields (middle) using the last eleven years of yield data. There is little difference between the five-year and ten-year average yields for corn and soybeans. Note, however, the median yields for all three crops are higher than either the five-year or ten-year averages. Yield losses in poor years are large than yield bonuses in good years. - histacrg

|Table 2. Butler County Average Yields for |

|for Corn, Soybeans, and Oats |

|Year |Corn |Soybean |Oats |

| |(bu./acre) |(bu./acre) |(bu./acre) |

|1989 | 94.3 |33.9 |72.3 |

|1990 |129.5 |41.6 |70.1 |

|1991 |125.6 |40.0 |48.3 |

|1992 |152.3 |45.9 |73.6 |

|1993 | 73.9 |29.9 |33.5 |

|1994 |140.0 |49.1 |75.0 |

|1995 |125.1 |49.2 |82.7 |

|1996 |143.2 |46.5 |73.5 |

|1997 |137.7 |45.2 |76.9 |

|1998 |151.9 |51.7 |64.2 |

|1999 |145.9 |45.0 |70.6 |

|2000 |140.9 |46.5 |82.5 |

|2001 |157.9 |44.6 |62.1 |

| | | | |

|5-year | | | |

|average |146.86 |46.6 |71.26 |

|10-year | | | |

|average |136.88 |45.36 |69.46 |

Yield Goals

When evaluating the expected returns for a farm, the producer should establish crop yield goals slightly above the historical average. This would reflect an above average level of management and implies the adoption of the latest available technology for crop production. This would include optimum management practices of proper cultivar selection, seed quality, planting dates, population rates, row-spacing, fertilization, insect control, and timely harvesting practices. Keep in mind, however, that in some years production will exceed the established yield goal while in other years yields will fall below the yield goal.

Remember that a conservation plan is required for some farms and fields to remain eligible for government program benefits. Before purchasing a farm the buyer should check with the local Natural Resources and Conservation Service for any cropping restrictions that may apply.

Additional References

PM-1168 Corn Suitability Ratings – An Index to Soil Productivity

PM-1268 Establishing Realistic Yield Goals

Figure 1.

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|Table 1: Soil Survey Information. |

|A. Calculation of weighted potential yield. |

| |Map Symbol | |Erosion/ | | | | | |

|Soil Type | |Acreage |Slope |CSR |Corn |Soybeans |Oats |Alfalfa |

|Kenyon |83B |33.1 |2-5% |85 |154 |47 |92 |6.5 |

|Kenyon |83C |17.9 |5-9% |70 |149 |45 |89 |6.3 |

|Kenyon |83D2 |1.6 |9-14% |58 |136 |41 |82 |5.7 |

| | | |None to | | | | | |

|Clyde |84 |17.0 |Slight |75 |140 |43 |84 |4.2 |

|Floyd |198B |6.9 |2-5% |75 |144 |44 |86 |5.8 |

|Clyde-Floyd |391B |14.0 |2-5% |72 |140 |43 |84 |4.2 |

|Ostrander |394C2 |12.2 |5-9% |68 |145 |44 |87 |6.1 |

|Readlyn |399 |.2 |None to Slight |90 |157 |48 |94 |6.3 |

|Cresco Loam |783B |7.8 |2-5% |63 |123 |38 |74 |4.9 |

| | | | |

|D | |? |------ Severely Eroded Slope ------- |

| | | | | | | | | |

| | |110.7 acres | |75 |145.2 |44.3 |86.9 |5.6 |

|Slope and Gradient Symbols |

|No Letter = 0-2% |

|B = 2-5% |

|C = 5-9% |

|D = 9-14% |

| |

|Erosion symbols |

|No Number = None to slight erosion |

|2 = Moderately eroded |

|3 = Severely eroded |

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