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College of Food, Agricultural, and Environmental Sciences

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OSU Expert: Farmland Value Projected to Increase in 2013

December 11, 2012

COLUMBUS, Ohio – Cropland values in Ohio increased in 2012 and are expected to continue on an upward trend in 2013, despite the drought that devastated growers this year, an Ohio State University Extension expert said.

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 OSU 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.”

This is true, he said, in spite of the drought of 2012, which devastated growers and producers across the country, particularly in the Midwest including Ohio.

“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.” 

Ward spoke last week during Ohio State University's College of Food, Agricultural, and Environmental Sciences kickoff of its 2013 Agricultural Policy and Outlook series. The event initiates a series of county meetings to be held statewide next year. Dates and times for the meetings will be announced at a later date. 

OSU Extension is the outreach arm of the college. 

The Dec. 3 event featured presentations from experts from the college's Department of Agricultural, Environmental and Development Economics (AEDE), who discussed issues the food and agricultural community should expect in 2013, including information on policy changes, key issues and market behavior with respect to farm, food and energy resources, and the environment. 

Because of the moderate to severe drought conditions many growers experienced, profit margins were highly variable, said Ward, who is also an AEDE assistant extension professor. 

But crop insurance proceeds will alleviate some of the revenue shortfall and financial stress due to the drought Ward said, noting that 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 to $489 per acre for Ohio corn next year, he said. Returns to Land for soybeans are projected to be $102 to $295, with Returns to Land for wheat projected at $122 to $288, Ward said. 

The projections are based on OSU Extension Ohio Enterprise Budgets, and assume current prices of inputs and present December and September and November 2013 forward contract prices, respectively, he said. 

OSU Extension has a long history of developing enterprise budgets that can be used as a starting point for producers in their budgeting process. Farmers can find enterprise budgets for 2013 at http://aede.osu.edu/programs-and-research/osu-farm-management/budgets. The website is offered by Ohio State University’s AEDE.

The budgets are downloadable Excel spreadsheets. Users can input their production and price levels to calculate their numbers. The budgets feature color-coded cells that allow users to plug in numbers to easily calculate bottom lines for different scenarios. 

Detailed footnotes are included to help explain methodologies used to obtain the budget numbers. The budgets also include a date in the upper right-hand corner of the front page indicating when the last update occurred.

Author(s): 
Tracy Turner
Source(s): 
Barry Ward