Examining Land Values, Rents, Crop Input Costs & Margins in 2017

by: Barry Ward, Leader, Production Business Management – OSU Extension

Low crop margins and uncertain land value and cash rental markets will continue to be important themes as we look ahead to 2017 as producers grapple with high per bushel costs relative to crop prices received. Less than ideal weather conditions in parts of Ohio in 2016 compounded financial stress on many crop farms however insurance proceeds and USDA ARC (Agricultural Risk Coverage) and PLC (Price Loss Coverage) 2015 payments delivered in October of 2016 alleviated the potential severe stress on many farms.

According to data from the Ohio Ag Statistics Service, bare cropland value decreased 0.9% in Ohio in 2016. According to this data, bare cropland averaged $5800/acre, down from $5,850/acre the previous year. The Western Ohio Cropland Values and Cash Rents Survey (AEDE) was conducted in January through March of 2016. The projected value for “average” cropland in western Ohio was $7,034 per acre. “Top” cropland in western Ohio was projected to average $8,853 per acre while “poor” cropland in western Ohio was expected to average $5,465 per acre. These values reflect projected decreases of 6.9 to 8.1%.

The Chicago Federal Reserve Bank October 1 survey of bankers found land values of “good” farmland were down 3% from last year with the 3rd quarter showing a 1% decrease in farmland values across the district. In this same survey however, the data revealed a year-over-year 1% increase for “good” farmland in Indiana. This is seemingly at odds with the data summarized by Purdue University.

Purdue University conducted their annual land value survey in June 2016 and found year over year decreases in farmland value that ranged from 8.2 to 8.7% depending on land productivity class. The different survey timing may explain some of the differences in survey results however the differing results lends further confusion to the direction and magnitude of farmland value change in the eastern cornbelt.

Strong equity positions (relative to pre-2006) together with continued low interest rates continue to lend positive support to land values. Low projected profit margins in 2017 will likely restrict further land value increases and possibly cause another decrease in land values. These competing fundamentals create a continued uncertain picture for land values in 2017 although continued low margins together with the potential for higher interest rates suggest lower farmland values in 2017. One wildcard is how producers choose to spend their USDA ARC or PLC payments. Will they retain this as working capital to insure against future years of low profit margins or will they stay aggressive in the farmland market?

Enterprise budget projections for Ohio’s primary row crops for 2017 indicate the potential for low margins. “Returns to variable costs” (gross revenue minus variable costs) are projected to be $188-$353 per acre for Ohio corn in 2017 depending on land production capabilities. “Returns to land” (gross revenue minus all costs except land cost) for Ohio corn remains low and ranges from -$37 to $116 per acre. Estimates for “returns to total costs” for Ohio corn in 2017 are negative for all three land classes evaluated.

Budget projections for 2017 soybeans show “returns to variable costs” to be $235-414 per acre. “Returns to land” for Ohio soybeans are projected to range from $60-$230 per acre. “Returns to total costs” are projected to be negative for all three land capability classes evaluated however these figures are generally higher than corn return projections for 2017.

Wheat budget projections for 2017 show “returns to variable costs” to be between $123 and $219 per acre. Wheat return projections are generally lower than soybeans or corn at this time however straw returns and double-crop soybean returns (where optional) may significantly improve the economic viability of raising wheat in 2017.

These return calculations assume current prices of inputs and current December, November and September 2017 futures prices, respectively. These projections are based on OSU Extension Ohio Crop Enterprise Budgets available online at: http://aglaw.osu.edu/farm-management-tools

Archived budgets are available online at: http://aede.osu.edu/research/osu-farm-management/enterprise-budgets

Strong equity positions together with higher property taxes will continue to lend support to cash rental rates however low to negative projected profit margins in 2017 will continue to apply downward pressure on rents. These competing fundamentals suggest a flat to slightly lower cash rental market outlook for 2017.

Variable costs for Ohio corn for 2017 are estimated to be 1.7% to 2.8% lower compared to 2016. Variable costs for corn for 2017 are projected to be $319 to $393 per acre. Variable costs for 2017 Ohio soybeans are projected to be 2.9% to 3.4% lower and range from $182 to $196 per acre. Wheat variable expenses for 2017 are projected to range from $154 to $184 per acre, down 9.9% to 13.3% from 2016. Lower fertilizer prices will likely be the primary fundamental driver of lower variable costs in 2017.

Outlook information presented here was developed with data and/or research from OSU Extension, the Energy Information Administration, USDA, USDA ERS, USDA NASS, Purdue University, University of Illinois, Federal Reserve Bank of Chicago, DTN, futures markets and retail sector surveys. While gauged to the best of this author’s capabilities, forward looking statements contained in this document may prove to be incorrect due to changes in supply and demand and other political and economic related events.


Small Farmer College to be held in Fredericktown, Ohio

Calling all small farmers and future farmers, do you have a passion to make your land profitable but are not sure of the steps to take to get there?  Well you are in luck!  OSU Extension – Knox and Morrow counties will be hosting a Small Farm College this winter in Fredericktown Ohio.

The New and Small farm college is an eight week program that will be on Monday evenings from January 9th– February 27th with March 6th as a snow date.  The class will be held at the Taste of Country Banquet Hall 128 High Street Fredericktown, OH 43019 .  Dinner will begin at 6pm, with the program starting at 6:30 p.m. – 9:00 p.m. Cost is $150 per person (additional family members – $100 each).  This price includes: 3 ring binders of resources, a soil sample, and meal each evening. Registration is required by January 2, 2017.

This amazing eight week course will offer a wide variety of topics to new and seasoned farmers.  The course teaches participants how to set goals, plan, budget, and where to find resources to help them start farming and to improve existing farming operations. This course will also show how to manage financial and farm records.  Extension Educators will cover many different enterprises that can be profitable on many acres or on as little as one acre.  Participants will learn about the benefits as well as the pitfalls of each enterprise, which will help them pick and choose what would work best for them and their interests.

The wide variety of topics that will be covered during the coarse include: Getting started in the planning process, Sources of assistance, Agricultural legal issues, Insurance considerations for the farm, Inventory of natural resources, Financial and production record keeping, Crops and Horticulture production, Animal production, and Marketing.

For more information and for registration contact OSU Extension, – Knox County, 740-397-0401, or Morrow County, 419-947-1070.

Farm Management School to be Offered in Darke County

by Sam Custer

According to AgWeek, “the most recent U.S. Department of Agriculture statistics show that the number of farmers ages 25 to 34 is growing nationwide. That’s the result of strong crop prices from 2007 to 2013, which generated higher farm income and gave young would-be farmers a better chance to support themselves and their families.

Young farmers and ranchers, for their part, say they’re not being handed anything and that they face major financial challenges. The strong crop prices that encouraged young farmers to get started are gone — corn, which once sold for as much $8 per bushel, brings about $3.50 per bushel now — but land prices, which soared during the boom years, haven’t come down.”

OSU Extension will be partnering with Farm Credit Mid-America to hold a Farm Management School this winter to address this need from the agriculture community.  The series will teach young, beginning and small business farmers about finances, business plans and how to make their operation successful.

What we will cover:

1/5   –     Making Record Keeping Do More Than the Tax Return

  • Developing Your Balance Sheet

1/12 –      What Is the Mission of Your Farming Operation

  • Basics of Finance

1/19 –      Developing Your Business Plan

1/26 –      Farm Transition Planning

2/2   –     Ag Law 101

Presenters for the series will include Bruce Clevenger, Eric Richer, Dianne Shoemaker, Peggy Hall and Sam Custer from Ohio State University Extension.  Jeff Roeth from Farm Credit Mid-America will also be a presenter.

OSU Extension, Darke County would like to thank our sponsor Farm Credit Mid-America for their support in holding this program.

PRE-REGISTRATION AND PRE-PAYMENT ARE REQUIRED.  Download the full flyer and registration at http://go.osu.edu/darkefarmmanagementschool. $50 per person.  Registration deadline is December 27, 2016.   Registration includes snacks and materials.  Make checks payable to Ohio State University Extension.  Mail to OSU Extension, Darke County, 603 Wagner Ave, Greenville, Ohio 45331.

For more information about OSU Extension, Darke County, visit the Darke County OSU Extension web site at www.darke.osu.edu, the OSU Extension Darke County Facebook page or contact Sam Custer, at 937.548.5215.



Grain Marketing: Turning On-Farm Storage into Profit

With corn and soybean prices trading at values near or below breakeven points, it’s important to develop a marketing plan that allows farmers the ability to try and capture potential profits while minimizing risk. OSU Extension is offering three meetings this December for farmers to learn about marketing grain in a tight economy.

Farmers have the option of attending one of three meetings, featuring Jon Scheve of Superior Feed Ingredients as a guest speaker. Meeting dates and locations are as follows:

·       Auglaize County: Dec 7, 5-9pm. Wapakoneta Eagles (25 East Auglaize St, Wapakoneta, OH). To register contact 419-739-6580.  Pre-registration is due 12-2-16.

·       Paulding County: Dec 8, 9am – 1pm. Paulding County Extension (503 Fairground Dr, Paulding, OH). To register contact 419-399-8225.  Pre-registration is due 12-2-16.

·       Madison County: Dec 9, 9am-1pm. Beck’s Hybrids (720 US 40, London, OH). To register contact 740-852-0975.  Pre-registration due 12-5-16.

Jon Scheve of Superior Feed Ingredients will be talking about what can influence markets in the upcoming year and how to better prepare your operation for the opportunities and challenges you will be facing. Jon will explain how on-farm storage combined with forward selling, market carry, and basis appreciation can provide added income. He will also educate farmers on how hedging with futures and options can be used to protect farmers from risk.

Registration for each meeting is free and includes a meal. Pre-registration for each meeting is required. Contact the hosting county Extension office to register (Auglaize: 419-739-6580; Paulding: 419-399-8225; Madison: 740-852-0975).

Managing Farm Financial Stress Workshop Series to Be Held in Wayne County

Farmers are facing a tough agricultural economy.   Grain, livestock, and dairy producers are all coping with prices that result in slim to breakeven profit margins.  For a number of farms, operating in the red is their reality.  Unfortunately, the price outlook for most agricultural commodities does not offer much hope in the near future.  Farming under these financial conditions is causing stress among farm families and within farm operations.  Some farmers are wondering how much longer they can continue to operate their farm, or if they should continue.

Recognizing the level of stress that exists in the farm community, a program entitled “Managing Farm Financial Stress” has been scheduled for Friday, December 16 at Fisher Auditorium, 1680 Madison Ave. on the OARDC campus in Wooster.  The program will provide participants with tools and information that can help them manage through the current financial situation, and make sound decisions regarding their farm operation.  Registration begins at 9:30 am. The program begins at 10:00 am and will conclude at 3:15 pm.   There is no charge for this meeting and lunch and refreshments will be provided.  Program and lunch expenses are being covered by sponsorships from Farmers National Bank, WG Dairy, Commodity Blenders, Gerber Feed and the Wayne-Ashland Dairy Service Unit.

The program features a general session in the morning with afternoon break-out sessions offering participants their choice of three different tracks.  Morning topics and speakers include:

  • Mental Wellness: Recognizing and managing/coping with the stress of financial hardship: Jim Foley, Director of Community Education and Prevention; Counseling Center of Wayne and Holmes Counties
  • Gathering and Using Farm Financial Information: Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics
  • Dairy Price and Market Outlook: Cam Thraen OSU (Emeritus) Dairy Market Specialist

Afternoon breakout tracks feature multiple presentations focusing on Financial Management, Legal Considerations, and Healthy Family, Healthy Farm.  Participants will have the opportunity to attend 3 presentations/discussions and can mix and match between themes.  Specific presentation topics and presenters include:

  • Calculating your Cost of Production and Using Cost of Production Benchmarks: Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics
  • Working with Your Lender to Re-structure Debt: Lender Panel with representatives from Farmers National Bank, Farm Credit Mid-America and Wayne Savings Community Bank
  • Exiting the Farm Business, Tax Implications for Exiting the Farm Business and Moving ahead with Helpful Business Structures: Robert Moore and Ryan Conklin, Wright and Moore Law Co. LPA
  • Moving Towards Mental Health: Jim Foley, Counseling Center of Wayne and Holmes Counties
  • Moving Forward with a Farm Advisory Team: Mark Thomas, Stark Co. Dairy Farmer
  • Healthy Family Communication: Rory Lewandowski, Extension Educator Wayne County

The meeting is open to farmers, and anyone working with farmers and farm families.  As mentioned previously, there is no charge to attend but pre-registration is requested by calling the Wayne County Extension office at 330-264-8722 by Friday, December 9 to ensure enough meals are prepared.

Planning for the Future of Your Farm Workshop to be held on January 18, 2017 in Jefferson, Ohio

OSU Extension will be hosting a farm success and estate planning workshop titled “Planning for the Future of Your Farm” on Wednesday, January 18, 2017 from 9:30 a.m. to 4:00 p.m. at the Ashtabula County Extension office.  If you are thinking of how and when to transfer your farm business to the next generation, then this workshop is one which you will not want to miss.

This workshop is designed to help farm families develop a succession plan for their farm business.  Attend and learn ways to successfully transfer management skills and the farm’s business assets from one generation to the next.  Learn how to have the crucial conversations about the future of your farm.  This workshop will challenge farm families to actively plan for the future of the farm business.  Farm families are encouraged to bring members from each generation to the workshop. Plan today for the future success of your family business!

The featured speakers for this event will include: Robert Moore, Attorney at Law, Wright & Moore Law Company and David Marrison, Extension Educator for Ashtabula County.  The fee for this workshop is $20 per person with a registration deadline of January 11, 2017.  This class will be limited to the first 40 registrants.  The fee includes lunch and program materials. More information about this program can be obtained by calling the Ashtabula County Extension office at 440-576-9008 and a program flyer can be found at: http://go.osu.edu/ne-events