In Ohio, the price of farm real estate — which includes all land and buildings used for agriculture production — has shot up 7.5 percent from 2010 to an average of $4,300 per acre, the U.S. Department of Agriculture recently reported.
That was higher than the national average of $2,350 per acre, up 6.8 percent from last year, according to the report.
The boost in cropland prices alone was even greater, jumping 8.6 percent to $4,400 in year-over-year comparison.
It’s a trend that’s been gaining momentum for several years as U.S. farmers have planted more crops in 2007 and 2010 than any other year in the past 60 years, based on government data.
Corn producers alone are on track to produce the third-largest corn crop in history this year.
“The bottom line is that all of this is largely demand driven,” said Barry Ward, an agriculture economist at Ohio State University. “We are now using more corn to make ethanol than ever before. We are exporting more soybeans to China. We’re kind of playing catch up with being able to produce as much as what the world needs in terms of these primary crops.
“As the commodity prices go up, the land prices go up,” he said.
Mike Weasel, a former banker and Realtor who specializes in buying and selling farmland for Wilson-Harvey Auction Group, with offices in Springfield, said investors are chomping at the bit to get in the farm real estate game.
“As an alternative investment, farmland has been pretty good,’’ Weasel said. “If I could find enough land to satisfy the demand, I wouldn’t have time to talk. There’s just a preponderance of people out there who are wanting to own farmland.’’
Many potential buyers are farmers or farm operators looking to expand their operations with cash on hand from the profits of several flush years.
Weasel has seen it first-hand. He said he recently sold 1,300 acres of farmland in Madison County, just west of Columbus, for about $7.5 million to two different buyers.
“I went to two separate closings, and both paid cash,’’ he said. “One was a neighboring farmer, and the other was an absentee landlord.’’
Historically low interest rates have also contributed to the land grab for farm real estate, Weasel said.
“Some farmers would rather keep their working capital and borrow the money (to purchase more land) for a lower rate than what the rate of return of the farm is,” he said.
The only real dilemma facing farm investors is whether commodity prices will remain high enough to allow them to continue to turn a profit after input costs — the cost of labor, farm equipment and fertilizer, for example — are subtracted.
“It’s true that input costs are higher ... but those costs have lagged commodity prices a little bit, so we’ve still had pretty good margins and pretty good profitability in the last three or four years,’’ Ohio State’s Ward said. “In the short term, things still look pretty good.”
Commercial developers seem to agree, according to Weasel, who said developers who once bought farmland to build office parks and shopping malls are now consulting with him about selling the land back to farmers.
“I’ve had developers call me and say, ‘I think what I bought as development land isn’t worth developing anymore. So what’s this land worth as farmland?’ ” he said.
Weasel doesn’t think farm prices can stay high indefinitely. But he doesn’t think they’ll collapse like residential home prices did in 2008.
“There may be a bubble, and in all likelihood prices will come down,” he said. “But there’s an awful lot of cash chasing a very small amount of land available for sale, and that will keep prices stable.”
Contact this reporter at (937) 225-2437 or rtucker@DaytonDaily News.com.
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