Land rents up 13% in Indiana
It's another repeated refrain on what's seemed like a broken record in recent months: Farm land rents are heading higher in 2012, according to new information from Purdue University.
The results from the 2011 Purdue Farmland Survey are in, and they show cash rents for Indiana farm land will likely see a double-digit increase in 2012 after a 13% gain this year. That's the 3rd-largest one-year gain in the 37 years the Purdue survey's been around.
"On average, it would not be surprising to see cash rents increase as much as they did in 2011," Dobbins says in a Purdue report. "How much cash rents change in specific situations will depend, in part, on what changes have already occurred."
The biggest driver of higher land rents in the coming year will likely be strong world grain demand, Dobbins adds. "The domestic and international demand for U.S. corn and soybeans is expected to remain strong, and the U.S. Department of Agriculture projects average 2011-2012 corn and soybean prices will exceed the 2010-2011 prices," he says.
Land rents represent just one of many crop revenue variables that are seen rising. Input costs like fertilizer, seed and fuel are also heading higher, Dobbins says. But, grain prices are, right now, keeping just ahead of costs and interest rates will likely remain low. "Combine all of those factors and what is likely to happen is strong upward movement in cash rent prices," according to a Purdue report.
The trend in land rents since 2007, Dobbins says, has been "unusually variable," with year-to-year rent increases ranging between 0.6% and 13%.
"In this volatile environment, it is important for the landlord and tenant to have a detailed discussion about yield, price and cost forecasts to establish the 2012 cash rent," Dobbins adds.