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Netherlands Plans Temporary Investment Tax Break
by Ulrika Lomas, Tax-News.com, Brussels 03 July 2013 The Dutch Council of Ministers has adopted a proposal, submitted by Dutch Financial State Secretary Frans Weekers and Economic Affairs Minister Henk Kamp, allowing entrepreneurs to immediately deduct from tax half of corporate investments made between July 1, 2013 and the end of the year. According to the Dutch Finance Ministry, the measure will enable business owners to reduce their tax payments over the course of the next few years, thereby creating extra scope for investment totalling around EUR400m (USD522m). Both companies subject to corporation tax and firms currently paying income tax in the Netherlands will be able to benefit from the accelerated depreciation provision, provided that the investment, for example a machine, is used by January 1, 2016. Defending the decision, the Finance Ministry alludes to worrying figures released by the country’s Central Statistics Office, showing that corporate investment fell in the first quarter of 2013 by almost 8 percent. The Dutch Central Planning Bureau had anticipated a decline in investment of 10 percent for the whole of 2013, the Ministry explains. Welcoming the decision, Financial State Secretary Weekers stressed that the accelerated depreciation provision will help liquidity and give a much-needed boost right now to investment. Such a move will not only benefit entrepreneurs in the Netherlands, but the Dutch economy as a whole, Weekers ended. . Continue reading
"US Housing Market Recovery Still In Early Stages"
Prof. Stephen Oliner, a former senior official at the US Federal Reserve, tells “Globes” about the latest trends in US real estate. 1 July 13 17:43, Gil Shlomo “A fire sale” of US bonds, such as the funds of large universities are carrying out, is liable to cause bond prices to crash and send long-term interest rates soaring. A new crisis in the recovering housing market is then only a matter of time. Mortgage interest rates in the US have been creeping upwards in recent weeks, although the interest rate on 30-year fixed-rate mortgages is still just 3.91%. The concern is that a jump in the interest rate on long-term loans, such as mortgages, will deliver a serious blow to the fragile US economic recovery. Prof. Stephen D. Oliner, who held a series of senior positions in the US Federal Reserve over 30 years, is an expert on the subject. “Globes”: US home prices are still rising, almost 11% in the 12 months through March. On what basis is the market recovering? Oliner: “Prices began to rise, especially in areas which were severely affected by the bursting of the bubble, such as California. But the recovery is still in the early stages, and comes after a very sharp drop in market activity as a result of the 2008 crisis. In fact, new construction has not yet returned to a normal level, or even close to it.” There are claims that the recovery is driven by investors, rather than by the general public. “Investors are now taking a larger share of the housing market, far beyond the normal proportion. They are buying cheaply, renovating, renting, and expect to sell at a higher price later. In my opinion, this is a helpful development, because we have a shortage of rental properties, and this offers a solution for people who cannot really buy a home now in their current financial situation.” Land lottery Oliner’s name appears in the bibliography of a Bank of Israel research report published two weeks ago, in which there appears, for the first time, an index of the change in residential land prices. Surprisingly, the US does not yet have such an official national index of changes in land prices, even though the value of land was $17 trillion in 2006. “This is a noteworthy lack, which is why I would like to see the index I developed with my former colleagues at the Fed made accessible to the public. To the best of my knowledge, the Fed is seriously considering publishing the index on its website regularly.” Oliner’s last position at the Fed was senior adviser at the Division of Research and Statistics. He and his colleagues examined 180,000 land deals, which were defined as the sale of an empty lot or a lot with buildings slated for demolition, in 23 areas in the US in 1995-2009. If you thought that home prices in the US were volatile, you haven’t seen the graph of land prices, which rose fairly modestly in 1995-2002, but then jumped by an average of 135% in 2006, and by even more in East Coast cities. The bursting of bubble in that year sent prices down by more than 50% by mid-2011. The home prices index includes the price of land and the cost of construction. The fact that land prices rose and fell much faster than home prices (according to the Case-Shiller Index) in the current business cycle indicates that land prices are more volatile. Oliner attributes this to “supply rigidities”. “When demand for homes or commercial real estate grows, the supply of zoned land does not increase at the same rate as the number of workers or the amount of building materials. As a result, land prices tend to rise much more than the prices of other new construction inputs.” Should zoned land be a rationed product that drives up the price? “That’s a tough question. I think that regulatory review is required when land is rezoned. In the US, the changes mostly include the release of farmland at city margins for residences and commerce. This is a sensitive issue because the value of farmland is derived from its use to produce food, as well as for protecting open spaces. Uncontrolled changes are liable to result in urban sprawl, and we’ve seen ever-worsening traffic problems in constantly growing cities. “On the other hand, landowners want to protect property values, so they aren’t interested in increasing the supply, even if there is a social advantage. There are places where the land shortage is clearly dictated by the interests of landowners and homeowners. But there is no need to go to the opposite extremes and not examine land rezoning at all.” It is odd to talk about land shortages in the US. “The issue is not a shortage of land, but of deciding the best use for it. Opinion in the US about the direction of development is changing. There is a switch to the redevelopment of urban centers, partly because baby boomers whose children have grown are not interested in continuing to live in a big house in the suburbs. In addition, for municipalities, population density reduces necessary investment in highways and railways. It also creates a vibrant urban environment, which is something that we in the US are beginning to appreciate. In this sense, we are now catching up with the rest of the world.” Oliner currently serves as a resident scholar at the American Enterprise Institute. He advises lenders and borrowers to take into account the huge volatility in land prices when using land as collateral and on setting financing rates. In addition, in areas where land value is a large part of a home’s price, he emphasizes that loans should be granted especially conservatively. “The Fed is definitely worried about the day a reduction in quantitative easing is announced, even if is a drop in purchases to $60 billion a month from the current $85 billion,” says Oliner. “This will be a serious challenge, because the market has a tendency to over-react to any major change by the Fed. The market will conclude, mistakenly, in my opinion that a halt in purchases also means a halt in expansionist policy in general, including interest rate policy, more quickly than the Fed believes.” Oliner visited Israel to attend the 2013 American Real Estate and Urban Economics Association International Conference held on June 23-26 at the Hebrew University in Jerusalem. He participated in a panel on monetary policy after the global crisis together with governors and several officials of central banks from around the world. Negligible US interest rate until 2015 “The central bank really tries to manage market expectations, but it is not easy to communicate with the public, especially when working on two monetary fronts. Ending expansionist policy in the coming years will be a pothole-filled road,” says Oliner. The second front that Oliner talks about is the US interest rate, which most members of the Board of Governors of the Federal Reserve System believe will remain near zero until 2015. “The Fed has set thresholds, the crossing of which will set off a debate on raising the interest rate. An unemployment rate of 6.5% is one of them. The second, in general, is that inflation should remain under control. Since the unemployment rate is currently 7.5%, we are far from the unemployment threshold, and therefore from an interest rate hike,” he says. “It should be remembered that these thresholds are relevant only for interest rate decisions, and not for bond purchases, for which no quantitative threshold has been set,” says Oliner. “The Fed will begin to reduce its purchases at the same time as a sustainable improvement in the labor market. We’re not there yet, but if there will be several good monthly job figures later on, I see this happening in the fall, possibly in September.” “I believe that the purchases will stop altogether in the first half of 2014 and that the interest rate will remain negligible into 2015.” Published by Globes [online], Israel business news – www.globes-online.com – on July 1, 2013 Continue reading
Farmland Forecast
By: Marc Schober , AgWeb.com Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland. JUL 01, 2013 Most farmers have finished planting the 2013 crop and are turning their attention to weed and pest control. Although crop conditions are better than last year at this time, historically late planting may have an adverse affect on crop yields. Corn conditions were 8% of the crop in poor or very poor condition, compared to 22% last year. Corn in good or excellent condition was 67%, compared to 48% last year. Corn silking was at 3% as of June 30, 2013, compared to 22% from last year. Soybeans planted were at 96%, slightly behind the five year average of 98%. Last year at this time, 99% of soybeans had emerged, but only 91% have emerged as of June 30, 2013. Soybean conditions were 7% of the crop in poor or very poor condition, compared to 22% last year. Soybeans in good or excellent condition was 67%, compared to 45% last year. Winter wheat conditions were 42% of the crop in poor or very poor condition. Winter wheat in good or excellent condition was 32%, the same as last week. Harvesting began last week and 43% of the winter wheat has been harvested, compared to 73% last year at the same time. Spring wheat has all been planted and 93% has emerged, compared to the five year average of 99%. Spring wheat conditions were 5% of the crop in poor or very poor condition, the same as last year at this time. Spring wheat in good or excellent condition was 68%, compared to 71% last year. The July corn contract increased 0.3% over the past week ending at $6.55 per bushel, soybean prices increased by 3.8% over the past week ending at $15.70 per bushel, and wheat prices ended the week at $6.45 per bushel, a 5.0% decrease from last week. Year to year corn prices are down 5.4%, soybeans are up 2.5% and wheat is down 14.5%. For daily articles on farmland and agriculture, visit www.farmlandforecast.com . Grain Price Volatility In Soggy June JUL 01, 2013 The Corn Belt continued to experience record setting rainfall totals throughout June, resulting in the worst planting season in over 20 years. Areas of southern Minnesota, Iowa, Wisconsin, and Illinois have monthly rainfall totals in excess of double the respective averages, with single day rainfall totals over seven inches. The U.S. corn crop was officially fully planted as of the fourth week of the month and the U.S. soybean crop was nearly finished as of the end of the month, according to the USDA. On June 28th, the USDA surprised analysts with an increase in corn acreage in their annual acreage report. Corn planted acres for 2013 were estimated at 97.4 million acres, more than 2.0 million acres higher than analyst expectations. We have seen many farmers who were unable to plant corn due to the very wet weather and in turn, elected to plant soybeans or filed a prevent plant insurance claim. Soybean planted acres were estimated at 77.7 million acres, the highest planted acreage on record and an increase of 1% from last year. Grain Prices Front month corn prices increased by 2.6% this month, closing at $6.79 per bushel on the July contract. The new crop December corn contract decreased this month to $5.11 per bushel due to the bearish USDA acreage report. Throughout June, corn prices were volatile and paralleled weather patterns across the Corn Belt during planting. In the June WASDE Report, the USDA estimated U.S. corn production 135.0 million bushels less than the previous month at 14.0 billion bushels, due to delayed planting. Increased world corn production will help offset the decreased U.S. production, with the primary increase coming from Brazil. Soybean prices increased by 3.6% this month to close at $15.64 per bushel. New crop soybeans are currently at $13.03 per bushel due to the record amount of acres planted in the U.S. this year. In early June, soybean prices increased due to the severely delayed pace of planting. USDA held U.S. ending soybean stocks constant from last month at 265 million bushels in the June WASDE Report. As with corn, soybean prices were volatile throughout June, trending with moisture patterns in the Corn Belt. Wheat prices decreased by 8.1% this month, closing at $6.48 per bushel. Winter wheat production was estimated slightly higher in this month’s WASDE at 1.486 billion bushels, although total U.S. wheat production was estimated 8.3% lower than last year at 2.08 billion bushels, due to a decrease of 1.7 bushels per acre on average yield. Additionally, the U.S. Dollar strengthened in June, hurting the competitiveness of U.S. wheat versus other production areas in the world. Farmland Values The Creighton University farmland price index decreased in June for the sixth time in the last seven months, but remains above growth neutral at 58.4. There are concerns from bankers that farmland prices could be tapering. Ernie Goss, Chair in Regional Economics at Creighton University, commented, “Our farmland price index has been above growth neutral since February 2010. However, we are tracking a clear downward trend in farmland price growth.” The summer months are the typical lull in the farmland buying season and thus comparable sales greatly diminish. We have still seen a fair amount of farmland sales throughout June and feel that the farmland market is still in an upward trend. Additionally, the amount of outlier sales on the high end have been slowing. Planting Progress As of June 23, 2013 corn that has emerged was at 96%, down 3% from the five year average and down 4% from the previous year, according to the USDA, with 65% of the corn crop being classified as in good or excellent condition compared to only 56% at this point in 2012. Soybeans planted were at 92%, behind the five year average of 95%. Last year at this time, 98% of soybeans had emerged, but only 81% have emerged as of the fourth week in June. Having traveled in the Dakotas, Minnesota, Iowa, Wisconsin, Illinois, and Indiana throughout June, we do not understand how the USDA is classifying 65% of the current corn crop in good or excellent condition. Many corn fields show severe flood damage of the corn that has survived the enormous amount of rainfall thus far this spring. The maturity of the U.S. corn crop is at least two to three weeks behind on average, according to our first hand experience. Outlook Old crop corn prices increased by 12 cents on June 28th, due to the USDA acreage and stocks reports, which will continue to support farmers who have been patient enough to hold 2012 corn this long. Many local elevators have been paying well over $1.00 for old crop corn due to the severely low supply. Although 2013 is the opposite weather phenomena compared to the drought of 2012, corn supplies may become dangerously low again. The U.S. corn crop is in below average condition, according to the farmers we work with on a daily basis. We will continue to monitor the weather and amount of heat units the current corn crop is now finally absorbing. Our key concern of the late maturing corn crop is a late pollination period. Hot and stressful weather can cause major yield damage if present during pollination. For daily articles on farmland and agriculture, visit www.farmlandforecast.com . USDA Surprises with Increase in Corn Acreage JUN 28, 2013 The USDA shocked the agriculture world and defied analyst estimates, real world data, and basic common sense in their annual acreage report. Despite the worst planting season in over 20 years, the USDA expects 2013 corn acreage to be the highest since 1936. Corn supplies as of June 1, 2013, declined to 2.76 billion bushels, the lowest since 1997 due to the devastating drought last year. Acreage US farmers are expected to plant 231.3 million acres of corn, soybeans, and wheat for the 2013 crop year, a roughly 1% increase from 2012’s 229.8 million acres. High commodity prices and low supplies from last year’s drought are incentivizing farmers to plant as many acres as possible. Corn planted acres for 2013 were estimated at 97.4 million acres, 200,000 acres higher than 2012 and 100,000 acres higher than last month’s WASDE estimate. The USDA corn acreage estimate was surprising as farmers across the Corn Belt have been unable to plant corn due to difficult wet weather during the planting season. Analysts’ expectations were for a two million acre reduction to roughly 95.0 million acres of corn. Soybean planted acres were estimated at 77.7 million acres, the highest planted acreage on record and an increase of 1% from last year. Record breaking planted acreage is expected in New York, South Dakota, and Pennsylvania. A large increase in soybean acres were noted in Indiana, Iowa, Missouri, Nebraska, and South Dakota, most likely due to farmers switching from corn to soybeans. Wheat planted acres were estimated at 56.5 million acres, an increase of 1% from 2012’s 56.0 million acres. 2013 winter wheat planted area is 42.7 million acres, a 3% increase from last year, and spring wheat acreage is estimated at 12.3 million acres, a slight increase from 2012. For the acreage report, the USDA surveyed more than 70,000 farmers by telephone, mail, internet, and personal interviews during the first two weeks of June. The questions covered 11,000 one square-mile randomly selected areas across the US. Quarterly Stocks Corn stocks as of June 1, 2013 were estimated at 2.76 billion bushels, a 12% decrease from last year. The quarterly stocks estimate was roughly 80 million bushels less than analysts’ estimates due to higher than expected feed usage. 1.26 billion bushels of corn are stored on farms, down 15% from 2012. Off-farm stocks, at 1.50 billion bushels, are down 10% from last year. Disappearance from March 2013 to May 2013 was 2.64 billion bushels, compared to 2.88 billion bushels a year ago. Soybean stocks as of June 1, 2013 were estimated at 435 million bushels, a decrease of 35% from 2012 and the lowest level since 2004. On-farm stocks were 171 million bushels, a 4% decrease from a year prior. 263 million bushels were located in off-farm locations, a 46% decrease from last June. Disappearance from March 2013 to May 2013 was 564 million bushels, a 20% decrease from last year. As of June 1, 2012, all wheat stocks were estimated at 718 million bushels, a 3% decrease from a year prior. 120 million bushels were held in on-farm locations, up 7% from last June. Off-farm stocks were estimated at 598 million bushels, a 5% drop from a year ago. Disappearance from March 2013 to May 2013 was 516 million bushels, an increase of 13% from last year. Outlook The USDA, known for their surprises and inconsistent data, didn’t disappoint today. Anyone who has spent a minute of time in the Corn Belt, would easily realize the USDA’s estimate of 97.4 million acres of corn is unrealistic. Based on our first hand experience of looking at farms from the Dakotas to Indiana, even 95.0 million acres of corn is a stretch. For daily articles on farmland and agriculture, visit www.farmlandforecast.com . Crop Progress: 2013 Planting Almost Complete JUN 25, 2013 Corn planting progress in the top 18 corn producing states now finished, as farmers now fill their fields with soybeans. Farmers have done tremendous work catching up to this average due to the setback from the heavy rains. However winter wheat is in poor conditions. As of June 23, 2013 corn that has emerged was at 96%, down 3% from the five year average and down 4% from the previous year. Corn conditions were 8% of the crop was in poor or very poor conditions, markedly better than 14% the previous year. And corn in good or excellent conditions was 65%, compared to 56% last year. Soybeans planted were at 92%, behind the five year average of 95%. Last year at this time, 98% of soybeans had emerged, but only 81% have emerged as of June 23, 2013. Soybeans in poor or very poor conditions are 7%, compared to 15% last year. Soybeans in good or excellent condition are 65% compared to only 53% last year. Winter wheat conditions were 43% of the crop in poor or very poor condition compared to only 17% at the same time last year. Winter wheat in good or excellent condition was 32%, compared to 54% last year. This year 95% of winter wheat has headed, close to the 97% that had headed at this time last year. Harvesting began two weeks ago, with 20% of wheat currently being harvested compared to 63% at the same time last year. Spring wheat is 96% planted, compared to the five year average of 99% planted by this time. Of the planted wheat, 90% has emerged, compared to the five year average of 97%. Spring wheat conditions were 5% of the crop in poor or very poor condition compared to 4% at the same time last year. Spring wheat in good or excellent condition was 70%, compared to 77% last year. The July corn contract decreased 2.25% over the past week ending at $6.53 per bushel, soybean prices remained the same over the past week ending at $15.12 per bushel, and wheat prices ended the week at $6.79 per bushel, a $0.01 decrease from last week. Year to year corn prices are up 3.5%, soybeans are up 2% and wheat is down 6.2% For daily articles on farmland and agriculture, visit www.farmlandforecast.com . Rural Economy Reaches Six Month High JUN 25, 2013 Growth in the rural economy reached a six month high in the month of June, according to the June survey of rural bankers. Improving economic data and expectations for record farm income has increased confidence in respondents, despite over half of bankers expecting the Federal Reserve to reduce bond purchases over the next six months. The Rural Mainstreet Index (RMI) increased to 60.5 in June from 58.8 in last month’s survey. The farmland price index decreased in June for the sixth time in the last seven months, but remains above growth neutral at 58.4. There are concerns from bankers farmland prices could be tapering. Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University, commented, “Our farmland price index has been above growth neutral since February 2010. However we are tracking a clear downward trend in farmland price growth.” Bankers were asked this month about the Federal Reserve’s Quantitative Easing (QE) strategy. Roughly 55% of bankers suggest QE should be reduced over the next six months and for the reduction to be implemented immediately. “Furthermore, almost one of five bankers, or 19.4 percent, think QE3 has been unsuccessful at stimulating economic growth and 43.3 percent of bankers indicated that the program has put excessive air in asset price bubbles such as farmland prices,” said Goss. Survey This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. For daily articles on farmland and argriculture, visit www.farmlandforecast.com . Continue reading
