Ohio land market remains strong amid changing farm economics

By Ty Higgins, Ohio Ag Net

Ohio continues to be one of the strongest farmland markets in the Farm Credit Mid-America territory, but the latest data shows that the story is not simply about rising land values.

Location, land productivity, availability, and an increasingly diverse pool of buyers are all shaping what farmland is worth across the Buckeye State. At the same time, farm economics are forcing producers to be more selective about when and where they invest.

According to Farm Credit Mid-America’s latest farmland value benchmark study, Ohio farmland values increased just over 10% during the past year, compared to a 7% increase across the organization’s five-state territory of Indiana, Ohio, Kentucky, Tennessee and the Delta counties of Arkansas.

“Ohio realized just a little above a 10% increase, so leading the way,” said Jenny Reithman, head of collateral production at Farm Credit Mid-America. “Lots of different reasons for that, including the old real estate adage of location, location, location. So that’s the thing we talk about as we talk about the results of this study.”

That location factor becomes particularly apparent when looking at individual regions of the state.

Northeastern Ohio posted one of the most significant increases in the benchmark, with farmland values rising 17.6% over the past year. Reithman said the region provides a good example of the multiple forces competing for a limited supply of farmland.

Traditional agricultural producers remain active, including row-crop and cattle operations. But they are competing with buyers interested in building homes, recreational properties, and other uses. Businesses moving into the region are adding another layer of demand.

When those different sources of demand converge on a limited supply of quality farmland, values can increase rapidly.

“Any economic adage: you add all those demands together, low supply of good farmland for sale, and we have so steeply increased prices when ground does become available,” Reithman said.

That dynamic is not limited to northeast Ohio. Across the state, farmland values are becoming increasingly localized, with significant differences possible between counties and even individual properties.

The number of buyers competing for a tract and the amount of land available for purchase are two of the most important factors, but buyers are also paying close attention to the characteristics of the ground itself.

“Farmland values can vary quite a bit,” Reithman said. “We talk about some of our highly productive areas, and we also talk about some of those areas with a lot of that interest coming together, and you can really have some hot spots.”

In western Ohio and other areas dominated by traditional row-crop production, productivity and efficiency are becoming increasingly important considerations.

“We’re starting to see buyers become more selective as opportunities come up,” Reithman said. “They think about the productivity of the ground, the ease of the operation for larger equipment.”

The size of a tract can also influence its value. While smaller parcels were once viewed as having an advantage because they could appeal to a broader range of buyers, Reithman said larger, contiguous tracts are commanding premiums in some areas.

The competition for Ohio farmland is also coming from well beyond the traditional agricultural sector.

Ohio’s major metropolitan areas — including Columbus, Cleveland, Cincinnati, Dayton, Youngstown, Akron and Toledo — are surrounded by areas where residential, recreational and commercial development can compete with agriculture for land.

“Ohio is a very diverse state with lots of those metropolitan areas and a lot of people in those areas,” Reithman said. “So, we are seeing significant demand for value and dollars coming into the farmland from all of those competing sources.”

Economic development can also have an indirect impact on farmland values. Businesses moving into the state bring investment and jobs, and some of that economic activity eventually finds its way into the land market.

In some areas, that influence is reaching farther from metropolitan centers than it has in the past.

“You start to see that circle outside of those metropolitan areas, where values are really growing from all of those diverse interests,” Reithman said. “It’s farther out than what we’ve sometimes seen in the past from those metropolitan areas in the Columbus-going-east area, all the way out to Muskingum County and that ring of land.”

Commodity prices and production costs have created a much more challenging economic environment for producers. With tighter margins, farmers are taking a harder look at how a potential land purchase fits into the overall operation.

“I think we see our producers stop and think about, is this the right card to play at the right time?” Reithman said. “How do these purchases fit into the goals for our operation? And is expansion the right time right now?”

That more cautious approach is beginning to show up in the amount of time some properties spend on the market.

“You might see land when it comes available just sit on the market just a little longer,” Reithman said. “Still not long by any means. But we’re far from the days of you’d make a couple of phone calls, and farmland might be sold in minutes.”

That does not mean the market has become slow or soft. In particularly desirable areas, competition can still move a property quickly. Instead, Reithman sees a market in which buyers are doing more homework before committing capital.

For farmers who want to expand, that makes preparation especially important.

With limited capital and only so many opportunities to make significant investments, producers need to have a clear understanding of what type of land best fits their operation before a farm comes on the market.

That means identifying priorities such as location, tract size, productivity and operational efficiency — and then evaluating each potential purchase against those criteria.

Rather than trying to predict where farmland values are headed next, Reithman encourages producers to focus on positioning themselves to take advantage of the right opportunity.

“We talk to our customers, and producers a lot about thinking about positioning rather than predicting a market,” Reithman said. “In a market where a highly productive tract in the right location can still generate significant competition, knowing what fits the operation and being financially prepared to act may be more important than trying to time the overall market.”