Pharos-Tribune

February 12, 2013

Farming input prices expected to stay about the same

Cash rents likely to continue their march upward

by Sarah Einselen
Pharos-Tribune

LOGANSPORT — Local farmers and Purdue Extension staffers say their early-season farming expenses will be about equal to last year’s, except for the upward march of farmland prices.

Some of the variable costs for corn and soybean crops this year are expected to increase, but others will decrease or stay the same, so the fluctuations will cancel each other out, according to the Purdue Extension.

Seed prices will make the biggest jump, said Alan Miller, an Extension farm business management specialist. Corn seed will likely go up 5 to 7 percent and soybean seed prices will increase more than that.

Royal Center corn farmer Bob Funk has already seen some increases.

“It can end up to be a negative at the end of the year if the [corn] prices don’t stay up,” said Funk, who with his brother Conrad Funk and nephew farms about 3,300 acres in Boone Township.

Seed costs are up “a little bit,” he said, and fertilizer is about what it cost last year.

Other costs that don’t vary directly with the crops — like machinery or cash rent — are going up year by year, Funk said.

“Machinery keeps getting higher every year,” he said. Every time his family trades something in “it goes up a bunch.”

Cash rents for farmland are up slightly, as well, affecting about 1,800 acres Funk rents to farm. But buying farmland outright is getting steeper more quickly, he said.

Cash rents have been trending upward for some time, said Tamara Ogle, a Cass County Purdue Extension Educator.

“The one part of the economy that has really done well through this recession is agriculture, so it’s not really surprising to see that,” she said.

But it’s still a challenge for current farmers, according to county Farm Bureau president Dave Forgey.

“That’s one of the bigger challenges we in agriculture are facing,” Forgey said of the cash rent increases. “In the last few years, $100 an acre for common land, maybe $125 to $140 an acre for some of the better land south of town, was pretty common.”

Now a few bidding wars have erupted and some land is being rented for more than $300 an acre.

However, input prices are merely one of many factors that influence the price of corn for the consumer at harvest time, so he couldn’t predict what corn might cost later this year.

Farmland is also being sold at higher rates.

“We’re seeing a tremendous amount of land move,” said Forgey, who also sits on Beacon Credit Union’s board of directors. “You take older landowners and they’re saying, this is a phenomenal time.

“When you can buy land for 4 percent interest right now … you look at it and say, ‘I’m not going to spend near as much money on interest, so I can spend a little bit more on the actual land.’”

Ogle has also noticed more farmers turning to a different leasing arrangement called a “flex lease” in the face of rising cash rents. A flex lease transfers more risk to a landowner than cash rents do, but also shares more of a good year’s reward.

Sarah Einselen is news editor for the Pharos-Tribune. She can be reached at sarah.einselen@pharostribune.com or 574-732-5151.