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Land rents sliding toward the center -- economist
While prices at the high and low ends of the land rent spectrum will likely see some adjustment toward the center, the general trend for land rents and the values driving them are seen flattening in another key corn- and soybean-growing state.
Despite recent sales data for the other side of the Corn Belt showing continued strength in land sale prices, Ohio State University Extension ag economist Barry Ward says he sees plenty of reason for either flat or even lower land values in his state in the next 12 months, driven mostly by modest-at-best grain profit expectations and the prospect of rising interest rates.
“Projected budgets for Ohio’s primary crops for 2014 show the potential for little to no profits,” Ward says in a university report. “Cash rental rates will move based on where they are in relation to the current market."
That latter assertion's got everything to do with where exactly current rental rates are in relation to the rest of the market; if they're "at the low end," Ward says they'll probably buck the overall trend of a flat-to-lower market and move higher, at least in the near-term. But if rent is running high, it'll likely be one of the first signs that the market's losing steam.
“Rents at the low end of the market may have some upside potential yet as they catch up," he says. "Rents at the high end of the market will be sticky as operators may be reluctant to ask for relief after one year of low prices for fear of losing part of their land base.”
Though land will be a major hot button when it comes to nailing down land sales and rental deals heading into 2014, the trend may actually more comprise prices for crop inputs like fertilizer. In this sense, where fertilizer prices go -- and how aggressively and effectively farmers contract that key input -- will go a long way to determining whether crop profits are in the cards next year.
"Fertilizer prices are lower compared to last year at this same time, and many producers are asking themselves if this is the right time to buy,” Ward says. “While it is hard to know exactly what direction and when prices will move, it is smart to keep up‐to‐date on important fertilizer products fundamentals.
"Cost management of this important input may be the difference in being a low-cost or high-cost producer."