View Full Version : Farmland Values Up Sharply

Monday, August 29th, 2011, 09:50 PM
Even though housiing is still depressed. A consequence of quantum easing, that cash has to go somewhere.

Indiana farmland values have hit an all-time high after jumping an average of 24 percent from 2010 _ a rate of increase not seen since 1977.
According to the 2011 Purdue Farmland Value Survey, statewide increases ranged from 22.8 percent to 25.3 percent because of strong grain prices, low interest rates, strong farmland demand and a limited supply of farmland being brought to the market.
“With high crop demand and prices, the outlook for agriculture is very optimistic relative to other industries,” said Purdue Extension agricultural economist Craig Dobbins. “As long as those strong grain profit margins continue, farmland values are likely to increase.”
The survey found that the value of poor-quality farmland averaged $4,386 per acre, average-quality farmland $5,468 and top-quality farmland $6,521.
Dobbins said the trend in Indiana’s farmland values was common throughout the Midwest and Eastern Corn Belt.
While the news of a strong farmland market may be good for current owners, it presents a continuing challenge to potential buyers or those who rent farmland.
“Cash rents are up about 13 to 14 percent, and those are driven by the same factors as the farmland value increases,” Dobbins said. “But because lease arrangements are made up 12 to 16 months prior to harvest, it is difficult for landlords and tenants to determine an appropriate cash rent. ”
Because of grain market variability and weather concerns, Dobbins said there has been increased interest by growers and landowners in lease agreements with flexibility in cash rent. In these situations, the final amount of cash rent due would be determined postharvest.
Farmers who want to purchase farmland may also find the increasing land prices challenging. Dobbins urged potential buyers to think about the possibility of revenue declines and input cost increases before they make final decisions.
“Farmers have to think about what a farmland equity loss would do to a specific operation,” he said.
While the economy remains volatile, Dobbins said farmland owners are better positioned now to handle a downturn than they were 30 years ago when agriculture struggled to deal with another financial crisis.
“It seems farmland is mostly held in financially strong hands and purchases are being made with modest borrowing,” he said. “We may see a pause or decline in farmland values, but because there is less debt against the land, such a change should not cause financial stress like in the 1980s. Of course, it depends on the amount of actual decline.”
This is why Dobbins encourages farmers to do some financial stress testing of their businesses. They need to know where the business will stand if there is a decline in farmland values of 10 percent or 15 percent, or if the cash flow margin becomes negative.
“In this volatile environment, farmers not only need a Plan A, but a Plan B and maybe a Plan C,” he said.

Source (http://crothersvilletimes.com/?p=2852)

Tuesday, August 30th, 2011, 09:59 AM
The Weimar hyper-inflation all over again...

And as always, in all inflationary scenarios, the new money is always worth more to those who get their hands on them first, i.e. those with the best banking connections. And guess who that is. :thumbdown

Tuesday, August 30th, 2011, 11:15 AM
The Weimar hyper-inflation all over again...

And as always, in all inflationary scenarios, the new money is always worth more to those who get their hands on them first, i.e. those with the best banking connections. And guess who that is. :thumbdown

Well no not really, the land is becoming more expensive because of ethanol production. Good farm ground has always increased at a faster rate than the rest of the economy. The price of farm land is based on the amount of bushels of corn per acre it produces . This also effects what the ground rents for by the acre. A example of this would be -around here currently land around here rents for $110 per acre while in Northern Indiana it would be $185 per acre. Pasture land is based of how many head of cattle it will support per acre, right now it is about $10 per head each month. I know this sounds confusing but there are also factors in the price of farm land, such as is it close to a urban area, distance to a grain elevator/ processing plant, ect., but mostly it is based on its production value.

I think the cost figures in this article are off by as much or more than $1,000.00 on the price per acre. I just looked at some land yesterday that was good decent ground for half what the article stated, and I thought it was too high based on other land around it.

Ethanol production has currently over inflated the cost of corn and the value of the land, I will suspect the land value to decrease with the decrease in the price of corn. I often wonder if it is not real estate speculators that have such articles written so they and make a quick dollar on their purchases. I would not pay this too much attention, these articles come out all the time and usually are wrong about the cost.