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Indiana’s Farmland Values Up Again In 2013
Thursday, August 29, 2013 WEST LAFAYETTE, Ind. — Last year’s drought did little to slow the pace of rising farmland values and cash rents. They are up this year in a big way again, according to a Purdue University study. Drought last year sent corn and soybean prices soaring to all-time highs, which, along with crop insurance indemnities, meant better-than-expected farm incomes. High net farm income, low interest rates and high farmland demand with limited supply combined to push the state’s land values upward by anywhere from 14.7 to 19.1 percent, depending on productivity. Statewide cash rents increased by 9.4 to 10.9 percent. “While the 2012 Indiana crop suffered from the worst drought since 1988, the increase in farmland values did not bother to slow down,” said Craig Dobbins, Purdue Extension agricultural economist. The biggest increases were in high-productivity land, which jumped by 19.1 percent to $9,177 per acre. Average-productivity land increased 17.1 percent to $7,446 per acre, and poor-productivity land was up by 14.7 percent to $5,750 per acre. Land values, cash rents and farmland productivity were estimated for the study by surveying Indiana rural appraisers, agricultural loan officers, Farm Service Agency personnel, farm managers and farmers. The 261 respondents were asked to estimate long-term corn yields for poor, average and top-quality land. The state’s average long-term corn yields for poor, average and top-quality land were 127, 160 and 193 bushels per acre, respectively. Another area that saw growth is the transitional land market, Dobbins said. “The transitional land market — that is, farmland moving out of agriculture — seems to have sprung back to life,” he said. “This is a specialized market, with transitional land value strongly influenced by the planned use and location.” Overall, the survey showed a 24.4 percent increase in average transitional land value, up to $10,581 per acre. However, the estimated values from the 2013 survey varied widely — from $2,500 to $45,000 per acre. The median value was $9,500 per acre — $1,500 per acre more than in 2012. “Because of the wide variation in transitional land values, the median value might give a more meaningful picture than the average,” Dobbins said. Cash rents increased statewide, with the largest jump found in high-productivity land. Top-quality land increased by 10.9 percent or $29 per acre. Rent for average-quality land was up by 10.1 percent, or $21 per acre, and rent for poor-quality land was up 9.4 percent, or $15 per acre. The survey also assessed expectations for where farmland values and cash rents are headed in the future. Dobbins said the consensus is that increases will slow and, in some regions, values might stall or decline slightly. Forty-three percent of the survey participants said they thought farmland values would increase by an average 11.7 percent over the next five years. That means they expect an average annual increase of 2.2 percent. Thirty-five percent of the respondents thought farmland values would decline by an average of 12.3 percent over the next five years — an annual decline of 2.3 percent. The remaining 22 percent expected no change. Continue reading
Farmland Prices Hit Records
Thursday, August 22,2013 Farmland prices hit records Market may slow from higher interest rates and fewer exports BY PATRICK YEAGLE Record farmland prices continue in Sangamon County, but agriculture observers say the rise may be slowing down. The rising prices follow a nationwide trend driven by low interest rates and solid demand for crops, says John Hawkins, spokesman for the Illinois Farm Bureau. However, farmland prices may level out as interest rates rise, exports fall and profits on corn and soybeans get slimmer. Hawkins says farmland prices grew steadily for 30 years, but the past five years have seen a faster rise in prices. In central Illinois, farmland routinely goes for $10,000 per acre or more, Hawkins says. The increase likely came from strong demand for corn and soybeans from Europe and China, while ethanol drove commodity prices higher domestically. However, those markets have now slowed, Hawkins says. And the prospect of a larger total harvest means less profit for individual farmers because commodities become cheaper, he said. “We may be getting to point where we’re going to take a pause,” he said. “We’re supposed to have a good harvest this fall. If we have another good harvest next year, that could lessen farm income greatly, and that would probably throw cold water on land prices.” Allen Entwistle has farmed land in the Springfield area for about 50 years. He says he recently saw a tract of land near Edinburg, southeast of Springfield, go for $16,800 per acre. The plots with the best soil and drainage get the highest prices, Entwistle says, while low grade “class c” land goes for far less, often being used for hunting instead of farming. The high prices can be a hurdle for smaller operations or potential new farmers, Entwistle says, noting that it’s not uncommon to put more than a million dollars into a farm. That money often comes from a bank or a wealthy investor, who face big risks along with the farmer if the crop fails. Still, the risk is well worth the reward for many farmers, as the U.S. Department of Agriculture estimates that 2013 will bring $128 billion in total profit for America’s farmers – more than double the $63 billion earned in 2009. During the recession, farmland prices increased while other forms of real estate like commercial and residential tumbled, which Entwistle attributes to the land’s inherent value. “A house depreciates unless you’re constantly spending money on it,” he said. “That ground is always worth whatever you pay for it because land is limited. They’re building new houses every day, but scientists haven’t figured out how to make more land.” Contact Patrick Yeagle at pyeagle@illinoistimes.com . Continue reading
Woodland Values Rise In Line With Timber Demand
Gemma Mackenzie Thursday 08 August 2013 Strong capital appreciation and a buoyant outlook for the long-term timber market continue to drive demand for woodland. Commercial spruce plantation values have typically risen 30% over the past two years and amenity woodland price rises are not far behind, according to chartered surveyor John Clegg & Co. “People are viewing commercial forestry, typically large plantations of spruce in Scotland and the north of England, in a similar way to agricultural land. Long-term capital appreciation is the key driver, with forestry outstripping most other investment classes,” said John Clegg from the company’s Buckinghamshire office. “Investors are also looking at medium- to long-term global commodity prices, which are forecast to rise sharply as the recession ends and global population continues to rise.” Forestry management was more straightforward than agriculture, adding to its attraction, he said. “It also costs less to invest per acre and ticks the same taxation boxes as farmland, provided it can be shown to be commercially managed.” Commercial spruce plantation values averaged £6,000/ha, allowing for open ground and other species, said Edinburgh-based colleague Patrick Porteous. Pure lowland stands near to harvest could fetch £15,000/ha, he added. “For the past five years we have seen phenomenal growth in capital values, around 14% a year, mainly due to the value of timber, which has risen substantially since the early 2000s,” he said. “We have seen a shift in global timber trends with China absorbing a lot of output from Russia, Eastern Europe and Scandinavia. Although the UK still imports 65-70% of its timber requirements, rising transport costs and demand from new housing, plus a relatively stable exchange rate, should mean good returns for home-grown spruce.” A looming shortage of domestic supply was fuelling optimism, said Mr Porteous. “We have not seen nearly enough planting since 1988 – as the average rotation is 35 years, UK timber supply is going to tail off.” He believed that created a real opportunity for growers in accessible areas in southern Scotland on marginal land. “A lot of this area is ideal spruce country and growers stand to get very good returns. These plantations also provide good livestock shelter and have been shown to provide an extra month of grass growth.” More remote areas could also cash in. Loch Duagrich Hill, 430ha of highly attractive hill ground on the Isle of Skye, provided a good opportunity for an investor prepared to offer more than £485,000, he said. It had significant Forestry Commission grant income, allowing the new owner to plant and create mixed woodland with hill grazings, stalking and loch fishing. Amenity woodland values generally range from £8,500-20,000/ha, with smaller parcels near population centres and/or with sporting rights at the upper end, added Mr Clegg. “Like farmland, many people like the idea of owning woodland, and smaller blocks of mixed or broadleaved woodland offers lifestyle and amenity benefits,” he said. The 7.44ha Callins Wood, near Minehead, Somerset, at the more commercial end of the scale, was heavily stocked with valuable mature conifers and ready to yield immediate thinning income, he said. It is priced at £100,000 or £13,400/ha. Ash dieback remained the one big unknown in this sector. While prices for woods containing a small percentage of the species were unlikely to be affected, the picture was less certain where ash was more prevalent. “It will depend how much disease is found this autumn – we may see quite an increase in reports as people have become more aware of symptoms. The age of trees is also important – older trees will take several years to be affected and you can still use the timber,” said Mr Clegg. Outlook for timber The latest Timber Bulletin from forestry consultant and management company UPM Tilhill highlights the improving market, underlined by a 4% rise in UK processors’ market share to just under 45% of volume. Investment in forestry continues to provide outstanding returns compared to practically any other investment, said timber operations manager Peter Whitfield. In 2012 the return on investment was 18.3%, according to the IPD Annual Forestry Index, and the annualised return over the past 10 years was 16.3%. The latest National Forest Inventory Report had taken a more rigorous look at the private forest sector and estimated that overall softwood availability would average 16m cu m a year for 25 years. That, said Mr Whitfield, was an encouraging forecast. “There is no evidence of a shortage, although supply and demand is closely balanced.” Although clearance of commercial woodland, for example for heathland restoration and wind farms, was a concern, there was good evidence the level of timber market activity should continue as it has for the past few years. This will be driven by favourable exchange rates, continued investment and growth of domestic processors, available timber and the demand for biomass, said Mr Whitfield. Continue reading
