Associated Press
11-05-07
Farmland values rising
Farmers find it tough to buy land at this price
BY JAMES HANNAH, THE ASSOCIATED PRESS
DAYTON, Ohio - The last time fifth-generation family farmer Brian Harbage could
afford new cropland was in 1999, when he added 62 acres to his corn-andsoybean operation.
Harbage farms 2,500 acres near the western Ohio town of South Charleston. He
leases a majority of the acreage and is looking to expand so he can spread his
costs around and become more profitable.
But the price of U.S. cropland has soared to a record high.
"We can't hardly afford to buy good farmland anymore," Harbage said. "It stinks."
Average cropland values rose by 13 percent to $2,700 per acre this year, up from
the previous high of $2,390 last year, according to the U.S. Department of
Agriculture. In Ohio, the price jumped 10.7 percent, to $3,920 an acre.
The increasing value of cropland is being fueled by higher prices for commodities
such as soybeans, wheat and corn, which is getting an extra bump by the
popularity of the corn-based fuel additive ethanol.
Developers continue to nibble away at farmland near urban areas. With tax
incentives and farm subsidies in the mix, cropland has become an attractive
investment for farmers and non-farmers alike.
"Folks who come from a rural background and made good money off the farm
come back and invest in 80 acres just to own it," said Darrel Good, extension
economist with University of Illinois. "Clearly, it does make it more difficult to
expand."
The value of U.S. cropland has steadily increased since at least 1998, when the
average price for an acre was $1,340. In 2007, Ohio and other Midwestern states
saw double-digit percentage increases in value over 2006.
The rising land values cut two ways, said Howard Halderman, president of the
Wabash, Ind.-based Halderman Farm Management-Real Estate Services.
They tempt some farmers to sell the farm, get a big cash payout and retire, he
said; but they give other farmers incentive to stay by giving them more collateral
to buy livestock, equipment and other farming needs.
"We've had some people say, 'I'm not going to sell. This is the most money I've
made on the farm,'" Halderman said.
Hugh Vance, 51, who farms 2,500 acres of corn and soybeans near Wilmington
and Blanchester, was able to buy a combine a few years ago because the
increasing value of his land supported a bank loan.
And he is looking forward to having more money when he retires because he will
be able to charge higher rents for use of his property.
However, the high prices keep him from expanding.
"It's out of the question for me to even think about buying land," he said.
"They're not making any more farmland," Harbage said. "There's less to go
around."
Another effect of the rising price is that it can tempt the heirs to sell the property
once the landowners die, said Michael Duffy, an extension economist at Iowa
State University.
"Sentimentality has its price," he said. "There is some evidence we're seeing
some of that land being let go."
And the sizzling cropland prices may be poised for a cool-down, said Barry Ward,
of Ohio State University Extension's department of agricultural development. He
said the slumping housing market could ease residential-development pressure
on cropland.
"We may see this thing slow down a bit," Ward said. "I'm not counting on another
10 percent increase (in Ohio) in '08."