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Farmland Value
and Rent Outlook 2013
By Sam Custer
OSU Extension, Darke County
Many calls have come in to the OSU Darke County Extension office
recently regarding the cash rent outlook for 2013, the value of
farmland in the county and investment possibilities for land in the
county.
Recent farms sales in the county have also sparked the interest of many
landowners. Farms are easily selling for more than $10,000 per
acre in the county, some in access of $13,000 per acre.
Barry Ward, Leader, Production Business Management, OSU Extension,
Department of Agricultural, Environmental and Development Economics,
reported the following earlier this month.
Cropland values in Ohio have increased again in 2012. Data from the
Ohio Ag Statistics Service shows an increase of 13.6% for bare cropland
in Ohio for 2012. According to their data, bare cropland averages
$5000/acre, up from $4400/acre the previous year.
An OSU Extension survey conducted in December 2011 estimated that the
increase in value of Western Ohio cropland in 2012 would be 7.5-9.1%
depending on region and land class. The Chicago Federal Reserve Bank
and Purdue University both conducted surveys in June 2012 and found
that cropland values in Indiana had appreciated 10-18.1% from one year
ago.
Crop profitability prospects were positive in 2011 as they have been
for the most part since 2007. Profit margins in 2012 were highly
variable across Ohio due to moderate to severe drought. Crop insurance
proceeds will alleviate much of the yield shortfall and financial
stress associated with the 2012 drought. This period has seen some of
the most profitable years in the last 50 years of crop production.
These profit streams and healthier balance sheets have led many farmers
to seek an investment option for these profits and many have chosen to
invest in land. Investors outside of agriculture have also been
strongly considering and looking to farmland as an investment
alternative.
With many dollars and buyers chasing farmland, it isn’t a surprise to
see land values increase again substantially in 2012. Crop
profitability along with low interest rates has been the primary
drivers in this unprecedented run-up in cropland values. The relative
scarcity of farmland has also been a driver in cropland values.
So all of this begs the question, “Where are land prices headed in
2013?” The projected numbers for 2013 point towards higher cropland
values for 2013. Projected budgets for Ohio’s primary crops for 2013
show the potential for strong profits. The Federal Reserve has
indicated that it plans to maintain current low interest rates through
mid-2015.
Returns to Land (Gross Revenue minus all costs except land cost) are
projected to be $309-$627/acre for Ohio Corn in 2013 depending on the
land production capabilities. Budget projections for 2013 soybeans show
“returns to land” to be $179-$396. Wheat budget projections for 2013
find “returns to land” to be between $135 and $312 per acre. This is
assuming current prices of inputs and present December, November and
September 2013 futures prices, respectively. These projections are
based on OSU Extension Ohio Crop Enterprise Budgets available online
at:
http://aede.osu.edu/programs-and-research/osu-farm-management/budgets
With strong balance sheets in spite of the drought many farmers will
continue to be in the land buying mode.
The latest OSU Extension Survey of Cropland Values and Cash Rents found
that cash rents were predicted to increase 5.7 to 11.5% in 2012. Cash
rental rates will see continued upward pressure as higher commodity
crop prices and good prospects for profit in 2013 drive competition in
local markets. Producers that want to continue to operate their
existing rented land base will have to pay at or near the market rate
for their area. See the “Western Ohio Cropland Values and Cash Rents
2011-12” Factsheet online at:
http://aede.osu.edu/programs-and-research/osu-farm-management/publications
to see data on yields and cash rents for various land classes.
Outlook information presented here was developed with data from AEDE
research, the Energy Information Administration, USDA, other Land Grant
research, futures markets and retail sector surveys. While gauged to
the best of this author’s capabilities, forward looking statements
contained in this document may prove to be incorrect due to changes in
supply and demand and other political and economic related events.
For more detailed information, visit the Darke County OSU Extension web
site at http://darke.osu.edu, the OSU Extension Darke County Facebook
page or contact Sam Custer at 937.548.5215.
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