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Expected Cash Rents in 2014 on Professionally Managed Farmland
SEPTEMBER 3, 2013 By: University News Release By Gary Schnitkey , University of Illinois Courtesty of farmdocdaily Last week, the Illinois Society of Professional Farm Managers and Rural Appraisers released results of its mid-year survey concerning farmland prices and cash rents. Results from this survey suggest that cash rents in 2014 will be slightly below 2013 levels. Survey The Illinois Society of Professional Farm Managers and Rural Appraisers conducts a mid-year survey of its membership concerning land values and rental outlook. The Illinois Society is a professional organization whose members manage farms, appraise farmland and other agricultural property, and broker farm real estate. Society members are knowledgeable about the farmland and cash rental market. More information on the Illinois Society and its members can be found on its website ( www.ispfmra.org ). Several questions on this year’s survey dealt with cash rents in 2013 and expected cash rents in 2014. Cash rent questions were asked for four different land productivity classes: Excellent quality farmland has expected yields over 190 bushels per acre, Good quality farmland has expected yields between 170 and 190 bushels per acre, Average quality farmland has expected yields between 150 and 170 bushels per acre, and Fair quality farmland has expected yields less than 150 bushels per acre. Survey respondents were asked what “average” cash rent levels were in 2013 and what average levels will be for 2014. Note that these are average levels. There is a considerable range in cash rents even within a productivity class for a specific farm manager. Landowners have different goals with their farmland, leading to large differences in cash rent levels. Also professionally farm managed farmland has higher cash rent levels than average. A number of reasons why this occurs have been given, usually revolving around the market knowledge of professional farm managers and the return desires of professional farm management clients. Cash Rents in 2013 and Expected Cash Rents in 2014 For excellent quality farmland, the 2013 cash rent averaged $388 per and the 2014 cash rent is expected to be $374 per acre, a decline of $14 per acre (see Table 1). For good quality farmland, the 2013 cash rent averaged $332 per acre and the 2014 cash rent is expected to be $318 per acre, a decline of $14 per acre. For average quality farmland, the 2013 cash rent averaged $278 per acre and the 2014 cash rent is expected to be $263 per acre, a decline of $15 per acre. For fair quality farmland, the 2013 cash rent averaged $224 per acre and the 2014 cash rent is expected to be $212 per acre, a decline of $12 per acre. Continue reading
Farmland Values and Credit Conditions
AUGUST 21, 2013 By: News Release CHICAGO–Acording to the latest AgLetter published by the Federal Reserve Bank of Chicago, for the second quarter of 2013, “good” farmland values were up 17 percent from a year ago in the Seventh Federal Reserve District, which consists of Illinois, Indiana, Iowa, Michigan and Wisconsin. However, agricultural land values registered no gain in the second quarter relative to the first quarter of 2013, according to a survey of 211 agricultural bankers. The last time there was no quarterly increase in agricultural land values was in 2009. Generally, the stellar year-over-year gains in farmland values across the five District states masked the comparative weakness of the quarterly results. Moreover, the percentage of survey respondents anticipating farmland values to fall during the third quarter of 2013 was the same as the percentage predicting them to rise (7 percent); 86 percent of responding bankers expected farmland values to be stable. The District’s agricultural credit conditions were generally better in the second quarter of 2013 than a year earlier. The availability of funds for lending by agricultural banks was up relative to a year ago; the banks’ deposits were enhanced not only by high crop prices but also by payments for insured losses due to last year’s drought. Repayment rates for non-real-estate farm loans were higher than a year ago, with 94 percent of the respondents’ agricultural loan portfolio having no significant repayment problems. Renewals and extensions of non-real-estate farm loans declined from the level of a year earlier. The responding bankers perceived that non-real-estate loan demand for the April through June period of 2013 was below that for the same period last year. For the second quarter of 2013, the District’s average loan-to-deposit ratio edged up to 64.6 percent—12.6 percentage points below the average level desired by survey respondents. Finally, interest rates on farm loans rose for the first time since early 2011. Looking forward Crop producers will face tighter cash flows as their revenues decline (especially if crop prices slide further). Yet, the responding bankers did not expect agricultural loan volumes to rise for the July through September period of 2013 relative to the same period last year. In fact, some categories, including operating loans and livestock loans, were anticipated to shrink in the third quarter of 2013 relative to their levels in the same quarter of 2012, according to the survey respondents. Falling crop prices should bring relief to livestock producers, whose profits have suffered on account of the high feed costs in recent years. Continue reading
