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Cropland values on the rise across the Midwest
 
By DOUG GRAVES
Ohio Correspondent

COLUMBUS, Ohio — As tough as times have been for Ohio farmers, cropland values increased in 2012 and are expected to continue on an upward trend for 2013.

“Ohio cropland value rose 13.6 percent this year, with bare cropland averaging $5,000 an acre,” said Barry Ward, production business management leader for Ohio State University extension.

Ward, citing statistics from the Ohio Agriculture Statistics Service, expects the trend to continue next year, with “projected budgets for Ohio’s primary crops for 2013 showing the potential for strong profits.”

The latest USDA National Agricultural Statistics Service report shows a national increase over 2011 of nearly 11 percent, putting the average price per acre of farm real estate at $2,650. So with an increase in farm real estate of 13.6 percent in 2012 the average acre value was set at $5,000 – all this in spite of the drought of last year that devastated U.S. growers and producers, particularly in Ohio and neighboring states.

“We’re expecting the potential for profitability next year, with corn looking like it will be king again,” Ward said. “We’ll have farmers with strong balance sheets, which will drive land values, as well. With those strong balance sheets in spite of the drought, many farmers will continue to be in the land-buying mode.

“Because of the moderate to severe drought conditions many growers experienced, profit margins were highly variable.”
But crop insurance proceeds will alleviate some of the revenue shortfall and financial stress from the drought, Ward said, noting the last five-year period has resulted in some of the most profitable years in the last 50 years of crop production.

“With many dollars and buyers chasing farmland, it isn’t surprising to see land values increase substantially in 2012,” Ward said. “Crop profitability, along with low interest rates, have been the primary drivers in the run-up in cropland values.”

Depending on land production capabilities, returns to land are projected to be $204-$489 per acre for Ohio corn next year, he said. Returns to land for soybeans are projected to be $102-$295, with returns to land for wheat projected at $122-$288.

There’s good news for other states as well. In Pennsylvania, values increased just 4 percent, but stand slightly higher than Ohio, at an average of $5,200 an acre. New York farm ground values increased 8.2 percent, to average at $2,650 an acre, and West Virginia now averages $2,700 an acre, the same as last year.

The biggest increase in the Corn Belt was in Iowa, which saw values jump nearly 23 percent, to average $7,200 an acre.

But higher land and crop values also means a higher cost to operate. Keith Kennedy, vice president of collateral risk management for Farm Credit Services of Mid-America, said larger purchase prices means a higher down payment and more risk.
“You just have to have a stronger financial position in purchasing,” he said, adding it appears many farmers have that position, thanks to good budgeting and favorable grain and livestock prices.

Kennedy said Farm Credit is seeing “somewhat of a leveling” in price, though he expects the demand for farmland will at least remain where they are. “There’s nothing out there that tells us that land prices are going to come back down any time soon,” he added.
1/2/2013