Search Site   
Current News Stories
Metaphorical 'baler twine and barn lime' can help ag women cope well

Using wildflowers to lessen pesticide not as effective here, say specialists

Eastern Corn Belt wheat doing better than Plains states' crop
Wanted: More haulers for dairy delivery, say experts
How one farm optimally uses automatic watering for cattle

Researchers surprised by E. coli, water supply study

Poor weather quashing early soybean planting, for Illinois
Censky touts SARE for St. Louis ag conference

Ohio’s Great Tack Exchange draws from seven states for just five hours

Be mindful of how you work this spring, to avoid lower-back pain
Ohio Soy to host virtual field trips for students of all ages
   
News Articles
Search News  
   
Ag land prices up, though experts predict downslide
 
By STEVE BINDER
Illinois Correspondent

WASHINGTON, D.C. — USDA officials said average farmland prices increased about 9.4 percent last year, but several ag economists are predicting land prices will start a downslide, in light of declining commodity prices.

Gone are the days of $8 bushels of corn and soybeans that pushed past $18 a bushel, and some market experts these days are advising growers to lock in new-crop prices still hovering above $5 a bushel for corn and near $12 a bushel for soybeans.
A near-perfect growing season so far has driven market prices much lower, and if they stay there, overall farm income and farmland values will start a downward trend, said Craig Dobbins, a Purdue University ag economist.

“Corn and soybean prices are drifting downward … and without a doubt will help to tighten up the margins,” Dobbins said before the USDA National Agriculture Statistics Service (NASS) farmland values report was released Aug. 2.

“The report still will show increases in farmland values in excess of double-digits in the Midwest, which we expected, but given all of the market forces at play and the possible changes in interest rates, we may be seeing the start of an adjustment in terms of income and land values.”

At the recent Top Farmer Crop Workshop in Indiana, Dobbins and other economists said circumstances appear ripe for a downturn in farmland values, and therefore farmland income and wealth.
There still have been some record farmland sales occurring in Iowa and Illinois during the past six months – with some exceeding $16,000 an acre – while the NASS report reflects robust activity for the past year ending in June.

 While northern Plains states such as the Dakotas posted the highest percentage of increase in farmland values during the past year, at 36.3 (North Dakota) and 28.8 (South) percent, it was Corn Belt states Iowa, Illinois, Indiana and Ohio that saw some of the largest overall sales price increases.

Average per-acre values for farmland based on the annual survey were up 15.3 percent in the Corn Belt, including at $8,400 per acre for Iowa, up 20 percent; $7,800 for Illinois, up 16.4 percent; $6,900 for Indiana, up 11.3 percent; and $5,600 for Ohio, up 12 percent.

Michigan also posted double-digit increases over the year, with average acreage prices at $4,660, up 11.5 percent; Kentucky was at $3,300 per acre, up 8.2 percent; while average Tennessee values were at $3,800, up 2.7 percent.

Moving forward, through, it appears land values are headed down. “It would seem to me current land values are not out of whack, but in the future, it appears margins will be smaller, income growth will be lower and interest rates will be higher,” Dobbins said. “I think the era of seeing 20 percent gains (in farmland prices) is coming to an end quickly.”

If interest rates go up 1 percent and farm income goes down 10 percent, the average value of farmland in the Corn Belt – this year pegged at $6,400 an acre – would drop to about $4,352 an acre, according to Dobbins’ formula.

Jason Henderson, associate dean of Purdue’s ag college and head of extension, formerly with the Federal Reserve Bank, warned of an interest rate increase at the Indiana workshop. “The primary risk in agriculture right now tends to be interest rates,” he said. “When interest rates go up, the value of the dollar tends to go up, and exports and incomes tend to go down.

“How will agriculture respond to a narrowing of margins? Will farmers leverage long-term assets to build working capital? If so, I think it sets up another bust.”

Jody Lawrence, president of the Tennessee-based Strategic Trading Advisers, is making sure growers are aware of market conditions that may have them acting sooner rather than later on new crop decisions.

“As the rain falls and the temperatures remain nearly perfect for crop development … prices continue to plummet,” he said. “I realize that it is hard to make advance sales after some of the recent years of crop problems, but the market momentum for all contracts from current new crop to 2015 crop is bearish.”
8/8/2013