U.S. Cropland Prices Shackle Some Farmers
General Financial/ Business News -- November 1, 2007 -- DAYTON, Ohio -- The last time fifth-generation farmer Brian Harbage could afford new cropland was in 1999, when he added a modest 62 acres to his corn-and-soybean operation.PAID ADVERTISEMENT
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 in the U.S. rose by 13 percent to $2,700 per acre this year, up from $2,390 last year, according to the 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.
Adding to the equation are developers who continue to nibble away at farmland near urban areas. With existing 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. This year, Ohio and other Midwestern states saw double-digit percentage increases in value over 2006.
Iowa was up 17.4 percent; Wisconsin, 17.3 percent; Missouri, 17.2 percent; Illinois, 15.8 percent; Michigan, 15.0 percent; Minnesota, 14.7 percent; and Indiana, 10.4 percent.
Howard Halderman, president of a farm real estate company in Wabash, Ind., said rising land values cut two ways: They tempt some farmers to sell their land and retire with a big cash payout, but they give others incentive to keep farming by providing more collateral to buy livestock, equipment and other 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 in southwest Ohio, was able to buy a combine a few years ago because the increasing value of his land supported a bank loan. 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 Wednesday.
The sizzling cropland prices might be poised for a cool-down, said Barry Ward, of Ohio State University Extension's department of agricultural development. The slumping housing market could ease residential-development pressure on cropland, he said.
"We may see this thing slow down a bit," Ward said.
Author: JAMES HANNAH, Associated Press Writer
On the Net: United States Department of Agriculture: http://www.usda.gov/
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