By MICHELE F. MIHALJEVICH
Indiana Correspondent

WASHINGTON, D.C. — Farmland values and cash rents have increased nationally and in most Farm World-coverage states, according to the latest USDA figures.

The value of farm real estate nationally averaged $2,140 per acre as of Jan. 1, up 1.4 percent from $2,110 the previous year, the USDA’s National Agricultural Statistics Service (NASS) stated in its annual Land Values and Cash Rents report. Farm real estate value measures the value of all land and buildings on a farm.

Cropland value per acre nationally averaged $2,700, up from $2,670. Cash rent averages were also up, from $99 per acre to $102. The report was released earlier this month.

“Prices in the Corn Belt were kind of what we expected, a gentle increase,” said Scott Shimmin, a statistician with NASS. “There’s nothing in this that you just go, ‘Wow, where did that come from?’”

Demand for farmland is helping to drive up its value, he noted. “Agricultural products are competing with nonagricultural products for farmland. When that demand goes away, prices will go down. But the land has to be for sale before they can buy it.”

Farm real estate values in Tennessee increased 4.5 percent, from $3,300 to $3,450. They were up 2.6 percent in Illinois, from $4,530 to $4,650; up 2 percent in Indiana, from $4,020 to $4,100; up 1.3 percent in Iowa, from $3,850 to $3,900; up 1.1 percent in Kentucky, from $2,850 to $2,880; and up half a percent in Ohio, from $3,880 to $3,900.

They were down 2.7 percent in Michigan, from $3,750 to $3,650.

“The numbers fit in well with what we’re seeing, as things are holding very steady,” said Kurt Aumann, CEO with Aumann Auctions, Inc. of Nokomis, Ill. “The exception is for the best land, which is very much in demand. Everybody is quality-conscious.

“Agricultural land is the only stable real estate market in the country. It’s actually appreciated. The residential and commercial markets are suffering.”

Investors such as those in charge of hedge funds or pension and retirement plans are buying farmland at increasing rates, he said. “When you see people who invest for a living buying this property, you think they may know what they’re doing.”

Farm real estate is still a seller’s market, said Rex Schrader, president of Schrader Real Estate & Auction Co., Inc. of Columbia City, Ind.

“There are a lot more buyers than sellers,” he explained. “There are still not as many sellers as normal.”

Schrader said prices for farmland sold through his company have been similar to the increases noted in the report. “It’s been steady to strong,” he noted. “We’ve seen a steady increase since last summer and it continues through this summer.”

The decrease in farm real estate values in Michigan wasn’t unexpected, said Gerald Tillman, deputy director of the Michigan NASS field office. Farm values are following values in residential property, which have also declined in the state, he explained.

“The farm sector has been affected less than the other sectors. It had been holding its own, but there have been some failures in pockets, such as in the dairy industry,” he said.

The Michigan auction market is tough right now, Aumann said. “The ones that can buy are very conservative up there. There is so much product on the market. The housing situation is really atrocious. It got bad before everything else got bad. There’s nobody really left to buy.”

Ohio’s farm real estate values aren’t as strong as neighboring states’ because of the variety of land in the state, said James Ramey, director of the Ohio NASS field office.

“Those other states have fairly high-quality farmland,” he noted. “The land in the eastern part of Ohio isn’t as productive, so it doesn’t fetch as much. Land near the Indiana border is more productive and accessible. It would match up pretty favorably with the land in eastern Indiana.”

The economy probably helped cause the state’s small increase in values, he added.

Cropland prices per acre averaged $4,820 in Illinois, up from $4,670. In Iowa, they averaged $4,100, up from $4,050; Indiana, $4,030, up from $3,950; Ohio, $3,950, up from $3,900; Tennessee, $3,400, up from $3,270; and Kentucky, $3,180, up from $3,150. Michigan was $3,300, down from $3,370.

Cash rents per acre averages were up in Iowa, from $175 to $176. In Illinois, they were up from $163 to $169; in Indiana, up from $139 to $141; in Kentucky, up from $93.50 to $103; and in Tennessee, up from $73 to $78.

They were unchanged in Ohio, remaining at $101, and they were down in Michigan, from $81 to $80.50.

Landowners use a variety of ways to determine the cash rents they charge, Tillman said. “Some will check on prices, such as for hay, and calculate their numbers so they can show renters where they got the numbers,” he said. “Some of it is historical. They’ll say ‘my father rented it for this amount,’ and they never change it.

“Some will barter. It’s really not an exact science.”

Cash rents increased at a higher rate a few years ago until stabilizing in the last couple of years, according to the NASS report.

“In 2007-08, we had higher corn prices and lower input costs,” Schrader explained. “Owners charge for rent based on what renters expect to be able to make, and when input costs go up and corn and soybean prices go down, and their income goes down, renters aren’t looking to pay higher rent.”