Crop prices are down, but land values are still up

I read a good article in the West Central Tribune today by Jonathan Knutson about the strange paradox of crop prices falling but rental rates and farmland values still rising.

You can follow this link to read the article online, or read some excerpts below:

 

Rental rates, cropland values still increasing

 

Crop prices have plunged, but cropland values and rental rates continue to rise, a new report says. The average rental rate for U.S. nonirrigated farmland is $130 per acre, $5 more than a year ago, and the average price of U.S. cropland is $4,100 per acre, $290 per more than a year ago, according to an annual report from the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture.

Average rental rates and cropland values rose in North Dakota, South Dakota, and Minnesota. The increases, primarily a reflection of the multi-year stretch of farm profitability that appears to have ended, aren’t surprising, says Andy Swenson, a North Dakota State University Extension Service farm management specialist.

The newly released averages are based, in part, on leases and transactions negotiated before farm profitability plunged. The recent decline in farm profitability won’t show up fully in rental rates and land values until next year, he says.

David Bau, University of Minnesota Extension ag business management educator based in Worthington, says the 2015 rental rate average might not drop much from the 2014 average. Some aggressive farmers, who hoped crop prices would remain high, had negotiated 2014 leases at high rates. Those high-end rates are likely to decline next year, pulling down the average, Bau says.

 

Bau recommends farmers and landlords consider flexible rental agreements, which increase how much farmers pay when times are good and reduce what they pay when times are poor.

In many cases, however, landlords aren’t interested in such agreements, preferring the certainty of fixed rates, Bau says.

Future farm profitability will determine the direction of farmland values and rental rates, Swenson says. Farmland values also are helped because interest rates remain extremely low, limiting the appeal of competing investments such as certificates of deposits, Swenson says.

“Farm profitability and low interest rates are the two big reasons we’ve seen this run-up,” Swenson says. “With interest rates staying this low, farmland is more attractive.”

 

Here’s what NASS found for U.S. and state-level cropland and pasture values in 2014:

U.S. — Average cropland value rose 7.6 percent to $4,100 and average pasture value rose 11.1 percent to $1,300.

Minnesota — Average cropland value rose 10.9 percent to $4,870 and average pasture value rose 1.3 percent to $1,600.

Swenson cautions that state averages can mask big price variations between counties and even within the same county.

Please let me know if you'd like any information about farmland values in our area. I'd love to help you buy or sell some farmland.

Thanks,
Noah Hultgren
320-894-7528
noah@farmlandman.com

Ask a farmer: What is the difference between sweet corn and field corn?

I recently wrote an article for the Minnesota Farm Guide, about the difference between sweet corn and field corn. Take a look at the article below, or here: http://www.minnesotafarmguide.com/news/crop/article_bd236186-093a-11e3-9c90-0019bb2963f4.html

August 19, 2013 8:49 pm • By Noah Hultgren, Minnesota Corn Growers Association
“Ask a farmer” is a new column written by a different Minnesota corn farmer every month. It will be sent on the third Monday of each month and cover farming issues and questions that farmers often hear from the non-farming general public.

Sweet corn. It’s almost as American as apple pie.

If you’re barbequing with friends and family on a sunny weekend evening in Minnesota, chances are good that corn on the cob is part of the menu. Or maybe you’re celebrating Thanksgiving with a plump turkey and all the fixings – mashed potatoes, dressing, cranberries, and a nice big serving bowl filled with sweet corn.

When most people think of corn, it’s sweet corn that comes to mind. But the fact is, of the 97.2 million acres of corn planted in the United States last year, sweet corn made up less than 1 percent of the total crop. The rest was field corn.

When driving through rural Minnesota or any other Corn Belt state, it’s usually field corn you see out your window. Although field corn kernels start out soft like sweet corn, it’s not harvested until the kernels are dry. Field corn is used to feed livestock, make the renewable fuel ethanol and thousands of other bio-based products like carpet, make-up or aspirin.

Sweet corn is harvested when the kernels are soft and sweet, making it ideal for eating. If you grab an ear of field corn and try to take a bite, you’ll probably break your teeth. It’s hard and dry (and only tastes good to cows, chickens, pigs, turkeys and some wild animals).

U.S. corn farmers harvested 10.8 billion bushels of field corn last year. Minnesota corn farmers harvested a record 1.37 billion bushels. In contrast, 158.7 million bushels of sweet corn was harvested throughout the entire United States.

While sweet corn satisfies our taste buds, field corn improves our lives in many other ways.
One bushel of field corn weighs 56 pounds, and if it isn’t used directly for livestock feed, it is likely to be exported or made into ethanol that is used to fuel your car. Each bushel produces 2.8 gallons of ethanol, 18 pounds of dried distillers grains (a high protein livestock feed), 14 pounds of corn gluten pellets, 1.8 pounds of corn oil and 17 pounds of carbon dioxide (used in dry ice, the beverage industry, water treatment facilities and other applications).

The remaining field corn crop is used to make other food products, manufactured goods, exported to other countries and put into storage.

Sweet corn holds a place in American dining lore. Field corn nourishes livestock, powers our cars, cleans our air, creates jobs and builds strong local economies.

So, even though you can’t slather a cob of field corn in butter and eat it, it still touches our lives in many ways.

Noah Hultgren is on the Minnesota Corn Growers Association board and is a field corn, sweet corn, soybean and sugar beet farmer in Raymond, Minn., in Kandiyohi County.