NEW CSR RATINGS LOWER IN MOST CASES

Why new CSR ratings are lower
By Mark A. Newman

The New CSR values appear to remove the human factors such as liklihood of drainage and such.  This means that some low, flat ground will be lowered considerably.  A sample farm had a CSR of 28 on some low land.  The new rating is 8.  I sampled beans this year on such a farm and by pod count estimated a 45 bushel bean yield.  A normal year could be wet and problematic.  The new CSR tries to tell us the inherent characteristics of that spot in a field.  It is not intended to be a shorthand appraisal.

Many counties fared better than others.  Draw a diagonal line across Iowa from Fremont to Allamakee.  The further South & East you are from that line, the better you fared in general.  The opposite is true for Northwest Iowa.  Eg:  Sioux County has a 14 point downward adjustment for climate; Story has no reduction.  A real head scratcher for us in North Central Iowa is Southern Kossuth County's10 point reduction compared to Northern Winnebago County's 6 point reduction.  Pilot Knob in Winnebago County was long believed to be the highest point in Iowa while Kossuth is the home of the Des Moines River Valley.  Unfortunately, this factor makes it difficult to draw statewide generalities about the new CSR.

From our observations, the CSR is going to be lower.

A recent farm sold at auction -- advertised as a 71.5 CSR farm.  Not a word was said about the new CSR at the sale.  If the buyer learns the correct CSR (49) before closing, will he have a way out of the sale?  If he delays closing until after January 1, will there be more capital gain taxes to Seller?

Can a clause such as "AS IS" cure such a situation?  Who wants to find out?  Sellers are advertising "historic CSR" or "Former CSR ___, CSR2 ___."

If such a Buyer has a fatal case of Buyer's Remorse, a subsequent auction of the same farm will surely suffer from "second sale sickness."   Who will pay the losses?

A detailed explanation of the new CSR was attempted by Prof. Burras last May.  A link to his site is:

http://www.ucs.iastate.edu/mnet/_repository/2012/soilmanagement/pdf/Burras.pdf

Knowledge about the new CSR will soon be available from the usual government sources; Surety is up to speed on many counties at this time.

Taxes on ag land in Iowa are generally based on CSR values and other factors; will the local assessors use the new CSR when they value land again this January?  Some predict tax assessment protests to be filed if the old CSR is used and the new CSR is lower on a farm.   This is small potatoes compared to the misrepresentation issues discussed above.

Long and Short of it:  If I claimed to have a chart which could appraise any house in Iowa based on square footage, bathrooms and bedrooms, you would laugh at me.  Farms are not quite as unique, but the factors of actual crop history, nutrient program, drainage, configuration, location and proximity to markets are all important.  Perhaps land appraisers who have a good knowledge of these things will be employed more, as they should be.

An open auction, well advertised, is still the best appraisal!  Dollars per CSR point will be confusing bit of information for a time.  I predict that the term "historic CSR" will become common and we will continue to use that information.  I believe companies like Surety would do well to maintain a database of both the old and new CSR's.  Everything is relative!

Check out our upcoming sale on November 15, 2012 at 10:00 AM at the Branding Iron in Thompson, Iowa.  79 tillable acres, historic CSR of 76.1, and ready to farm for 2013!

-Mark Newman,  641-425-6003