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Land values holding steady in Ohio

New analysis finds that, despite significant value declines in Midwestern corn and soybean states, farmland values saw little to no change in the four-state area of Indiana, Ohio, Kentucky and Tennessee. In fact, Ohio saw an increase of 0.2% in land values, year over year.

Values for the northwest quadrant of The Buckeye State realized a 1.6% gain, the northeast part of the state saw a 2% decline, the southeast gained close to 3% and the southwest quarter fell 1.7%.

To put this into perspective, land values in Iowa fell 15% over 2014-15.

“It was a little surprising to us because we expected the numbers for our area of Ohio, Kentucky, Indiana and Tennessee to be close to break even or maybe a little bit of a pullback,” said Dennis Badger, the vice president of collateral risk management for Farm Credit Mid-America.

The company researched and analyzed 4,000 land sales in 2015 and compared it to over 100,000 land sales in the organization’s historical database. Badger acknowledges that Farm Credit Mid-America’s territory hasn’t seen the large levels of increases in recent years that took place in other parts of the Corn Belt.

“Usually those areas that go through periods of high growth and extreme rates of increase are the ones that suffer the most when there is a pullback,” Badger said. “Ohio did not see those massive gains, so the declines weren’t felt as much.”

That means that as the markets look a lot different than they did three years ago, land values will remain at current levels, meaning cash will be a part of many farmland transactions. Badger sees this as a positive because borrowers will have a little more skin in the game and will take a more cautious approach to risky investments.

“Most people purchase real estate on the anticipation principle,” Badger said. “While the short term one to five year outlook has some questions about rising values, I think the longer term 10 year outlook will historically show that the cost will be recouped.”

The cash factor of the land value equation may continue to change the demographics of Ohio farms, as the larger, more established farms gain the upper hand, leaving the small farms out of the mix.

That scenario also sets the stage for a very difficult starting position for newcomers to Ohio’s agriculture scene.

“Beginning farmers will find it challenging to grow into this industry with current land values and commodity markets,” Badger said. “It might involve renting properties longer than what was planned or finding a farmer that will be stepping out of the market and looking for a young farmer to take over the operation. It will take some creativity and patience.”

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