Real estate values in many Ohio neighborhoods continue to sag, but out in much of the state’s rich cropland, prices have never been higher.
Flush with cash and presented with low interest rates, farmers have bid up cropland to sky-high levels in recent years.
“At one point you could still buy in the average price range of $3,000 to $3,500 an acre. It’s easy doubled in some areas,” said T.J. Zimmerman, a broker with the Carlin Co. Realty & Auctioneers in Bryan. “Some areas are bringing $5,000 to $6,000 an acre. That’s kind of the new normal. We’ve sold property that’s upwards of $10,000 an acre for bigger chunks.”
Land prices have generally been rising slowly since the late 1980s, but that has accelerated in recent years, industry observers say.
According to the U.S. Department of Agriculture, the average value per acre for Ohio cropland was $5,700 in 2013, up 14 percent from 2012, and up 46 percent from 2009.
Land with high-quality soil commands even more, with prices approaching $8,000 an acre.
It’s not just Ohio where land values have shot up in recent years. The USDA said the average price for cropland in the five cornbelt states (Ohio, Indiana, Illinois, Iowa, and Missouri) was just less than $7,000 in 2013, up 16 percent from 2012 and up almost 80 percent from 2009.
Land brokers and agricultural economists say the increases are largely a function of the strong profits many farmers have enjoyed over the last few years with commodity prices riding high. Buyers also found competition.
“There was definitely more demand for land to purchase than there was supply. When you have low supply and high demand, that’s a factor in values,” said Roger Hayworth, a sales manager for Farmer’s National Co., a large agricultural real estate management company in Nebraska. “I still don’t believe there’s a lot of supply out there.”
Mr. Hayworth said many farmers have also been eager to find more controllable land, rather than searching each year for land to rent.
“If they couldn’t find more acres to rent, then their only option was to buy,” he said. “Over the past three to five years, cash has been pretty prevalent for these guys, and they’re able to go out and bid accordingly and aggressively to have land control.”
Even big-time investors got in on the game, seeing farmland as a safer income-producing investment than throwing money at the stock market. Still, local brokers say most of the land purchases in Ohio have been by local farmers. Commodity prices have fallen recently, and observers say land prices may level off somewhat. But they’re still historically high in many regions. Prime land in parts of Iowa, for example, has sold for more than $15,000 an acre.
Prices like that give economists pause.
“When you boil it all down and you look at trying to make sense of this from an economic standpoint, you really can’t,” said Barry Ward, an agricultural economist at Ohio State University.
Though recent high-profit years might support land at $8,000 to $10,000 an acre, more normal profit margins don’t.
Still, Mr. Ward said good farmland seldom changes hands, and many farmers feel when they have the cash, it’s time to buy.
And while he may question whether these values are sustainable — Mr. Ward thinks farmland may be in for a 5 to 15 percent correction in the future — he isn’t concerned about a bubble bursting like it did in the 1970s. Mr. Ward said banks continued to be cautious about lending for land purchases, and many farmers had paid for significant portions of their purchases in cash.
Dirk Meyer is an auctioneer and agent with Whalen Realty & Auction Ltd. in Wauseon, which primarily sells land in Lucas, Fulton, Henry, and Wood counties. Five years ago, he said, cropland averaged about $6,000 an acre in the area. Now the prices he’s seeing are in the mid to upper $7,000 range, though the company has sold land for more than $10,000 an acre.
As is the case anywhere, the best land commands the top prices. But sometimes farmers who own adjacent or nearby land are willing to pay a premium to add new fields to their farm.
A side effect of high land prices has been that some smaller farmers have been pushed out of the market.
“At $8,000 an acre, you can shoot a million bucks in the butt pretty quick,” Mr. Meyer said. “Most small farmers that have a second job just to stay alive can’t afford to stick their neck out for a million dollars.”
Contact Tyrel Linkhorn at firstname.lastname@example.org or 419-724-6134.