What has the recession done to farmland prices, farmstead values and cash rents? Without too much thought, the recession has likely turned around rising values for real estate and improvements and affected cash rental rates to some extent. But for Cornbelt asset values, how deep or shallow has the drop been?
Nationally, USDA says farm real estate values at the outset of the year were $2,100 per acre, a 3.2 percent decline from 2008. And that is the first decline in more than 20 years. USDA’s annual survey of farmland prices and cash rental rates reported a wide range, from no drop to an 11 percent decline based on regional dynamics.
Farm real estate values declined in the Eastern Cornbelt, but rose in the Great Plains. Values were up 1.3 percent in North Dakota, up 3.3 percent in South Dakota, up 1.5 percent in New England and up 2 percent in Kansas. But values were down 3.5 percent in Ohio, 2 percent in Indiana, 2.5 percent in Iowa, 4.3 percent in Missouri and 0.4 percent in Illinois. The Great Lakes states also dropped by similar amounts for aggregated farmland.
For cropland, the national average that was at $2,760 in 2008, fell to $2,650 in 2009. In the Cornbelt, cropland values were more varied, and ranged from a 6.3 percent gain in New England to a 5.8 percent decline in Ohio.
Pasture values dropped about $20 per acre over the past year, averaging $1,070. Throughout the Cornbelt and Great Plains pasture values declined, but were steady in Kansas and North Dakota.
While real estate values generally dropped, combined values of farmland and improvements increased 8.1 percent across the nation, but most impressively in the Cornbelt. Illinois and Indiana both recorded increases over 12 percent, but Iowa values rose over 17 percent. The Northern Plains saw values rise 16.7 percent in New England, 18.5 percent in South Dakota and 19.5 percent in North Dakota.
Despite the drop in land values, the cost of renting cropland went up by 5.3 percent from 2008 to 2009. Specifically, pasture rents remained unchanged, but rents for cropland rose from $85.50 in 2008 to $90 for 2009. USDA said, “The increases in cropland rental rates are the result of producers receiving strong commodity prices, while pasture cash rent is affected less by commodity prices and more by land values.” In the Northern plains, rents rose 7.6 percent from last year. Cornbelt averages were $146 for the stretch from Iowa to Ohio. The Cornbelt has nearly half of cash rented farms in the U.S. The highest rents were the $141 in Indiana, $170 in Illinois and $180 in Iowa. Rental rates rose 4.4 percent in Indiana, 4.3 percent in Illinois and 5.9 percent in Iowa. Because of the different dynamics affecting pastureland values, pasture rent has been more variable than rent for cropland. Rent is $10.50, which is steady from last year, and is an average of the past five years. Few Cornbelt states have sufficient information to report pasture rents, which range from a $43 high in Iowa to $14 in North Dakota.
For the first time since 1987, U.S. farmland values declined, when comparing 2009 with 2008. Cropland values went down in states from Iowa through the eastern Cornbelt, but rose in the Northern Plains. Despite the overall drop in land values, cash rental rates climbed slightly.
Source: Stu Ellis, University of Illinois Extension