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State farmland fetched higher cash rent in 2011

Cash rents rose again in 2011, compared to 2010. It’s one factor that buoys farmland values and contributes to land price increases.

The annual Purdue University land value and cash rent survey, conducted by Craig Dobbins, Purdue Extension ag economist, pegged cash rent on top-quality land at $28 more per acre in 2011. At the same time, cash rent rose on average land by $21 per acre, and by $17 per acre on poor land.

Key Points

Cash rents in Indiana rose again in 2011.

Rents were highly variable by region and type of land.

Cash rent as a percentage of land value lowest in 37 years.

Cash rents are highly variable by type of land and from region to region within the state, Dobbins observes. Average cash rent for the best land is around $230 per acre, with average land at $182 and poor land at $141.

Percent increases for cash rent from 2010 to 2011 are much closer, ranging from 13.9%, 13.0% and 13.7% for top, average and poor land.

Average yield per bushel of estimated corn yield varied from $1.22 to $1.12 per bushel statewide.

Dobbins notes that cash rent as a percentage of farmland value hit a 37-year low in 2011, at 3.5%, 3.3% and 3.2% for top, average and poor land, respectively.

Inside Indiana’s borders

Cash rent increased the most in 2011 in southwest Indiana, Dobbins observes. The next highest increase percentage-wise was in west-central Indiana. Cash rents in northern and central Indiana ranked next. The lowest increases were in northeast and southeast Indiana.

If you live in west-central Indiana and think cash renting is supercompetitive, you’re right. Rents there range from $264 per acre for the best land to $172 for poor land, the highest in the state.

Prediction: Land values and cash rents will hold the line in areas hit hard by drought

Guessing that both land values and cash rents might decline in areas hardest hit by drought seems like a reasonable assumption. However, Craig Dobbins, Purdue Extension ag economist, doesn’t believe that will happen.

Increases may not be as strong in those areas as in some other areas, and farmers may not have as much enthusiasm for buying or renting, Dobbins acknowledges. Yet when the dust from the combines finally settles this fall, he thinks values in those areas will at least hold the line, if not increase slightly. That applies both to land prices and cash rent.

“Crop prices will likely be high enough and margins wide enough that even in those areas, people will still bid up,” he notes. “Part of the logic will be that there won’t be such a devastating drought every year.”

Indeed, on certain soil types, it may be the worst crop in 37 years of farming. That’s what one farmer who farms lesser-quality land believes. Dryland corn over gravel that made 80 bushels per acre in a very dry 2007 has already been targeted for mowing down, he notes. That’s never happened to him before, he adds.

“I still believe farmers will have a hard time holding the line on rents, even there,” Dobbins concludes.

This article published in the September, 2011 edition of INDIANA PRAIRIE FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.