SALEM, Ohio — Attend an auction or check out one of the few farms for sale, and it won’t take long for you to figure out that farmland values have increased over the past few years.
Now the question is whether or not the prices will continue their assent, or if the land bubble will bust.
Two real estate insiders say there is no fall in sight — and the numbers continue to grow year after year.
Ohio farmland
In 2007, the average value of land per acre was $3,700 in Ohio. In 2008, the number grew to $4,020, and in 2012 (the last year data was available through the USDA National Agricultural Statistics Service), land averaged $5,000.
The land value jumped 13.6 percent from 2011 when it was valued at $4,400 per acre.
Neighboring states
In Pennsylvania, farm real estate value is up 4 percent. It climbed from $5,000 to $5,200 per acre.
And in Indiana, the average price climbed 17 percent, from $5,300 to $6,200 per acre.
National average
According to the USDA NASS, the average price for Ohio farmland jumped more than the national average. The United States farm real estate value, averaged $2,650 per acre for 2012, up 10.9 percent from 2011.
National land values
Regional changes in the average value of farm real estate ranged from a 26.7 percent increase in the Northern Plains (North Dakota, South Dakota, Nebraska and Kansas), to a 4.1 percent decline in the Southeast region (Alabama, Florida, Georgia and South Carolina.)
NASS also reported that the highest farm real estate values were in the Corn Belt region (Ohio, Indiana, Illinois, Iowa and Missouri) at $5,560 per acre.
The Mountain region (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming has the lowest farm real estate value, at $974 per acre.
Increases in national values
The United States cropland value increased by $450 per acre to $3,550 per acre.
In the Northern Plains and Corn Belt regions, the average cropland value increased 30.4 and 18.5 percent from 2011. However, in the Southeast region, (Alabama, Florida, Georgia and South Carolina), cropland values decreased by 3.8 percent.
Ohio farmland values
Rusty Kiko, of Kiko Auctioneers and Realty in Canton, Ohio, said land prices have been strong in the area that Kiko Auctioneers works in, which is from Ashtabula to Marietta, Ohio.
Combination of factors
Kiko said the land prices have been climbing for the past three years and said it is due to a combination of factors: low interest rates, Utica shale leasing and high commodity prices.
He added that the strongest prices have been for farmland and tillable cropland.
No-till effect
He also said the use of no-till practices by many farmers has a subtle effect on land demand. He said that by using no-till, producers can farm more land, meaning they are looking to expand because they can be more efficient and cover more land in the same amount of time.
Kiko said the combination of factors, plus the fact that farmers want to purchase land close to their farm, adds up to a big demand for land.
He added that many farmers are not carrying the debt load they were carrying 15 years ago, which means they are able to make more land purchases.
He said he looks for the land prices to increase or at least stay where they are as long as grain prices stay where they are at or increase.
“Maybe the price of farmland will level off, but I don’t see a bust in the near future. There is a strong demand for tillable land,” said Kiko.
Interest rates
Another factor in the attractiveness of land as an investment is that certificate of deposits (CD’s) have a low interest rate so many investors and farmers are taking their money out of the market and instead investing in land.
“If interest rates spur up and commodity rates would fall, then maybe land prices could tumble,” said Kiko.
“The bottom line is that they aren’t making more land. I’m optimistic about the future of agriculture.”
Pennsylvania farms
Kim Skumanick, president-elect of the Pennsylvania Association of Realtors, grew up on a dairy farm in central Pennsylvania and keeps farming close to her heart.
Specialization
One trend Skumanick has noted is that many farmers are looking to specialize.
“The trend is shifting from the family farm where they did everything, to specializing,” said Skumanick.
She said there has been an increased interest in people wanting to do crop farming and a high demand for properties involving niche farming.
Skumanick said an agriculture client contacted her about leasing a barn and pasture to focus on the production of a dairy cattle herd. She said the farmer wanted nothing to do with crop production and instead leased that ground to someone else.
“They want specialized farming,” said Skumanick.
Limited supply
Skumanick said it is rare to see farms come up for sale on the real estate market in Pennsylvania.
“Many farming families are keeping the farm and handing it down to the next generation,” she said.
Shale leasing
One factor that is limiting available farmland on the market is the influx of cash to landowners from selling mineral rights or creating a shale oil and gas lease.
Many producers are investing the lease money to build their operation or pay off debt.
Five properties
Skumanick research showed that only five properties in excess of 100 acres have been put on the market in the past few years and none of them were working farms.
For estate tax purpose I need the value of tillable farm land in Knox county in 2007.. Thanks.
Your best bet, Fred, would be to contact the Knox County Auditor, Jonette Curry, 117 East High Street, Suite 120, Mount Vernon, OH 43050; 740-393-6747. She would be able to give you the CAUV (Current Agricultural Use Valuation) for that year.