By ANN HINCH
Assistant Editor LONDON, Ohio — Cropland values are up to such extent in Ohio that they are now driving – even limiting – development, rather than the other way around, according to Barry Ward, assistant extension professor in production business management for The Ohio State University.
In southwestern Ohio, which has more prime land for growing corn and soybeans, he said last week that a December 2007 survey of rural appraisers, farm managers and other agricultural and land experts showed top ground was worth upwards of $5,200 an acre, while poor land was worth $3,300. Just six months later, OSU updated the survey and found the top value had risen to $5,900.
Higher crop prices make the land more profitable. Ward also said farmers with extra cash and outside investors seem to be buying ag land as a hedge against inflation and instability in the stock market. According to auction professionals with whom he’s spoken, urban developers have stopped showing up for land sales, but other investment interest is still high.
Urban development has backed off “tremendously” in Ohio, he explained. In the early part of this decade, developers were driving agricultural land value; now, even “location, location, location” doesn’t make much difference.
“It’s essentially the same (kinds of) parcels,” he said, that are now dominated by planting rather than building.
These land values Ward quoted are not statewide; as he pointed out, “We’ve got such a different state from west to east.”
According to the Ohio Agricultural Statistics Service, he said there was a 13 percent increase in cropland rents from 2007 to 2008, compared to a 5 percent hike the year before.
Ward said Ohio tends to lag behind western states in rents and land values – while top Indiana ground was fetching $200 an acre, in Ohio the rent was $175. As for anything higher: “You’re going to hear outlandish numbers,” Ward said. “I think everyone’s heard stories enough in Illinois and Indiana of $300 or so.”
As for specialty cropland values, he said anecdotal evidence places it at 150-200 percent of the value of row crop ground. A more scientific poll hasn’t been conducted because there’s “just not enough population out there to survey.”
OSU farm budgets tend to take average costs into account, he explained, and assume an average crop yield year. The realities of this year will likely be different because of high input costs and crop losses to flooding, drought and – most recently – windstorms of over a week ago caused by leftovers of Hurricane Ike from the Gulf of Mexico.
Budgeting for 2009 Planning a budget for 2009 is not an enviable job for farmers, in Ohio or elsewhere. Ward spoke to some people who attended the Farm Science Review in London, Ohio, on Sept. 16 about increased costs for next year.
The cost of planting corn was up 23-24 percent over last year, he said. The 2009 estimates from OSU predict – at the high end – planting costs of $800-$900 per acre, which includes fixed and capital costs such as labor, land and machinery as well as variables such as fertilizer, seed corn, chemicals and the like (this part is $400-$500 alone). Ward said these would be 12 percent higher than 2008 costs.
Soybeans represent a much lower input, at $525-$580 per acre for all costs ($230-$270 for variable costs). Already, market analysts have speculated that soybeans may nab Midwest acres from corn next spring because of potential comparable income for decreased investment – and perhaps hesitance on the part of lenders to extend credit in this uncertain economy, for higher fertilizer and land costs.
Still, “if people are going to have good (corn) yields,” Ward said, “we’re still at pretty hefty profits.” Per acre, 150-bushel corn at $5.50 would still show a profit despite higher input, according to the OSU budget model.
Fertilizer “That’s the big question mark,” Ward said of timing the purchase of fertilizer for next spring.
It used to be that experts advised farmers to buy ahead because prices went up in the spring, but he acknowledged “we’re in different times now.” He advised growers to think of nutrient alternatives that might save them money: traditional manure, municipal sludge and “green” manure through cover crops.
Ward said it is hard to be authoritative about manufactured and mined fertilizer costs because that industry is notoriously difficult to penetrate in order to learn about pricing and determine the root of costs. Right now, farmers are noticing natural gas prices have gone down – but fertilizer made with it has not.
The reality, he said, is that the primary driver of price right now is high world demand for anhydrous ammonia, potash and phosphate. Added to that are internal market pressures such as some worker strikes and the expense and difficulty of opening new mines. |
