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August 8, 2006
Land Value And Cash Rents Are Up, But Does That Surprise You?
There is no surprise, but farm real estate values took a healthy jump upward between 2005 and 2006. USDA’s land value survey says the overall value, which includes land and buildings rose $250 to a record high of $1,900. While that may be of moderate interest, the meatier information is buried in the report, and the farm gate will harvest and store it for you right here.
USDA’s land value survey found cropland rents increased 13% this year to $2,390, and pasture rents went up even more, by 22% to $1,000 per acre. But it has not been agriculture that has caused the trend. Low interest rates, a strong demand for non-ag uses, and investment were the driving factors. Land values peaked at $4,550 in both the northeast and southeast part of the country, followed by $3,040 for the Cornbelt.
Cropland values and the change from 2005 include:
Illinois $3840 up 13.9%
Indiana $3650 up 15.9%
Iowa $3060 up 10.5%
Kansas $927 Up 9.2%
Michigan $3000 up 9.1%
Minnesota $2180 up 11.8%
Missouri $2100 up 11.1%
Nebraska $1690 up 15%
North Dakota $610 up 11.7%
Ohio $3540 up 9.6%
South Dakota $1090 up 20.2%
Wisconsin $3000 up 15.4%
Pasture values and the change from 2005 include:
Illinois $1880 up 9.3%
Indiana $2090 up 8.3%
Iowa $1300 up 21.5%
Kansas $620 Up 17%
Michigan $2150 up 10.3%
Minnesota $1150 up 22.3%
Missouri $1500 up 11.9%
Nebraska $360 up 12.5%
North Dakota $250 up 13.6%
Ohio $2380 up 6.3%
South Dakota $360 up 16.1%
Wisconsin $1700 up 14.9%
Cash rent, nationally, rise 1.3% from 2005 to 2006, averaging $79 per acre. Pasture rents averaged $10.80, a 4.9% increase over 2005. USDA says, “The Corn Belt and Northern Plains regions, which together accounted for slightly more than one half of cash-rented cropland acreage, increased 1.7% and 0.9% respectively from 2005. Cropland cash rents increased $2.00 per acre to $119.00 in the Corn Belt and 50 cents per acre to $53.50 in the Northern Plains. The major corn and soybean producing States of Illinois, Indiana, and Iowa experienced increases ranging from 1.5 to 2.3% for cropland cash rents. Illinois and Iowa cropland cash rents averaged $132.00 and $133.00 per acre, respectively.”
Cash rent values for cropland and pasture (where available) include:
Illinois $132 and $34
Indiana $111
Iowa $133 and $38
Kansas $44 and $13.70
Michigan $65
Minnesota $88 and $19
Missouri $79 and $26
Nebraska $101 and $12.50
North Dakota $39 and $11.30
Ohio $86
South Dakota $53 and $12.90
Wisconsin $71 and $38
USDA’s land value and cash rent survey was taken the first two weeks of June and the entire report is available.
Summary:
USDA’s annual land value and cash rent survey indicates a strong upward move in both land values for both cropland and pasture from 2005 to 2006. As expected, cash rents climbed, but not as much as land values climbed.
Posted by Stu Ellis at August 8, 2006 6:47 AM | Permalink
Comments
I AM LOOKING TO BUY SOME LAND IN RURAL FORDVILLE, ND. HOW DO I FIND OUT THE VALUE?
THANK YOU
Greg:
Values are based on multiple factors, the productivity of the land, such as how much of a crop it can produce. However, land values are frequently based on demand, and when more than one person wants it. If you are planning to farm it, find the soil types from your local NRCS office and seek some help from the County Extension Agent about its productive capability.
If this is not productive farmland, the value will be measured by demand. Local realtors will be able to give you an idea of how much similar properties have been selling for. Their source of information is going to be property records that your county government will maintain. The local tax office will be able to point you to local property appraisers, which will also have a record of recent land sales and can help you determine the value of a particular piece of property.
There is not an Internet source that allows you to plug in a zip code number that calculates land values, but a visit with some of the locals at Fordville, ND, will be worthwhile.
Stu
Posted by: GREG at August 30, 2006 10:00 PM
The desired result of a land transaction is to have a farmer or land owner commit to the production of a low value grass crop for a period of 10 years. How do the two sides, the owner and the lease come to an economic and comfortable deal or price? I am assuming it is not a simple one year's rent time 10 nor is the present cash market price.
Would one approach be to assume an average yield of the land for the past 10 years, after all costs have a residual for land and that residual number, discounted for the advance of payment become the key to finding a fair price? How would you do it?
Posted by: Peter Abeles at November 30, 2007 4:24 PM
Presently, as landlord, I have a 60/40 cash crop lease agreement. The farmer wants to plant corn but says that it is more expensive than wheat and beans and would like the split to be 75/25. Is this right? He also says that because of the increased bu/acre of 170 vs 45 for wheat, I would come out ahead. What would you advise?
Visit with your operator for a thorough discussion of the concept, which could be quite reasonable. The operator has obviously worked through crop budgets and marketing scenarios and presented the bottom line to you. Without knowing what the details are, neither I nor you could make a good decision. Only you and the operator really know the potential revenue from the land, so I would suggest that an open-minded discussion soon be held to evaluate the best for both of you. That not only includes share of the crop, but the share of the production cost, which would tell you the net revenue. If the share rent is not equitable, maybe there is an opportunity for a small per acre cash payment to make it more equitable.
--Stu
Posted by: Ann at January 12, 2008 5:29 PM
I own 80 acres of farmland in Hamlin County South Dakota which has been leased out for many years. Crops have been sunflowers, wheat, corn as far as I know. What would be the CURRENT fair market lease cost for this property? I've only increased the rent once in the past 10 years. I'm not looking to take advantaqe, but I also don't want to be taken advantage of. Any help would be appreciated. PS: I don't live near the property. Thank you.
It would not be appropriate to make any estimate from this vantage point. Several suggestions include: Ask your operator what he or she believes would be a fair rental rate, which could either be a cash rent or a crop share lease, or an adjustable rental rate. Also, you might visit by phone with the Extension agent, Farm Service Director, or local farm managers in the area for their estimates.
~Stu
Posted by: Sandra at May 1, 2008 11:42 PM