Cash rents slowly catching cropland

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COLUMBUS – The value of Ohio’s cropland is projected to increase an average of 4.5 percent this year, according to an Ohio State University agricultural economics survey – continuing the sharp upward trend of the state’s land values over the past three to five years.
Cash rents (land rented or leased to farmers) are lagging behind the value of cropland, but are slowly catching up, mainly due to the current high commodity prices.
Record levels. “We are seeing record levels for both land values and cash rents and the numbers continue to march upward,” said Barry Ward, an Ohio State University Extension agricultural economist who conducted the survey.
“This trend, evident in all land sales, not just cropland, is occurring throughout the country – fueled by such factors as development, low interest rates and investment opportunities.”
The survey, Ohio Cropland Values and Cash Rents 2006-07, shares similar results with data released by the Ohio Agricultural Statistics Service, which points to increasing land values since 2002, with values rising as much as 10 percent the past two years.
While the Ohio Agricultural Statistics surveys focus on farmers and landowners, OSU Extension’s survey draws on the expertise of third-party individuals, from farm managers, to rural appraisers and ag lenders, to Extension educators.
Point of reference. “The data is important from the standpoint of farm financial analysis and management, and a point of reference for those interested in learning the value of their land either to sell or to negotiate cash rents.
“The survey is an intimate knowledge of what is going on in the state,” said Ward.
“This is the second year we’ve conducted the survey and we hope to continue providing the data every year.”
The survey calculated the value of top cropland, average cropland and poor cropland throughout Ohio overall, as well as by region.
Top cropland averaged $4,001 per acre at 177 bushels per acre of corn and 58 bushels per acre of soybeans; average cropland was valued at $3,371 per acre at 145 bushels per acre of corn and 46 bushels per acre of soybeans; and poor cropland averaged $2,759 at 116 bushels per acre of corn and 35 bushels per acre of soybeans.
Land in southwest and northeast Ohio was valued higher than land in northwest Ohio.
According to the survey, cash rents are expected to increase 6.7 percent this year.
Averages. Top cropland rents in Ohio averaged $131 per acre; average cropland rents in Ohio averaged $104 per acre; and poor cropland rents in Ohio averaged $80 per acre.
Cash rents by region were highest in northwest and southwest Ohio.
“A rule of thumb in calculating cash rents is that they are a percentage of the land value. In the ’80s and ’90s, cash rents used to be in the range of 5 percent. Now they are somewhere in the range of 3 percent. That says that either land values have skyrocketed, or cash rents haven’t kept pace,” said Ward.
“But with the increase in commodity prices, the Midwest is seeing the value of cash rents start to increase and begin catching up somewhat with land values.”

NOTE:
This study will add to existing research on Ohio farmland values and cash rents that can assist producers and landowners with purchase and rental decisions. Existing research includes:
Ohio Cropland Values and Cash Rents 2005-06

Ohio Farm Real Estate Markets

Land Rental Rates: Survey Results and Summary and companion Cash Rent Calculator

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