MICHIGAN
Cropland average per acre: $3,450
Cash rent per acre: $73
All winter land prices kept going up, up, up in Michigan's agricultural areas.
Now they sit in the $3,300- to $3,900-per-acre range in the Saginaw Valley. And
the buyers have changed.
"We used to have a lot of investors at land auctions," says Kim Heisler, chief
appraiser for Green Stone Farm Credit Services. "Now these values are being
pushed by farmers. It's farmer versus farmer at land sales."
He says among many there seems to be a conviction that high crop prices are here
for a while. It's an idea that's so tempting, it's changing people's minds about
the future.
"There are guys who were thinking about getting out of farming and selling their
land. Now they're pulling old machinery out and deciding it's time to stop
renting their land. They want a piece of this."
Heisler adds he is utterly surprised at how brisk the agricultural land market
is, given the poor housing and job markets in the state.
"These guys are really believing in these crop prices. I'm not sure they're
thinking through their higher expenses," says Heisler.
He says in many cases lenders are trying to hang in for a 25% down payment on
this land. But if the buyer has additional property, they often group their
acreage and get 100% financing.
"Honestly I'm nervous. Commodity prices look good, but expenses are so high.
"I think we'll see a lot of people buying crop insurance who haven't before.
They have so much invested in the land, that before they even see a sprout
they've spent a small fortune."
IDAHO
Cropland average per acre: $3,150
Cash rent per acre: $109
Realtors aren't getting much of a piece of the pie in Idaho's land market. It's
not because land isn't selling here. Rather it's a case of land being tightly
held and bought before it's ever put on the market.
Robert Morrison, an appraiser with Farm Credit Services out of Idaho Falls, says
two types of buyers are pushing up land prices.
First there are the farmers—many looking for feed bases for dairies. There's
been rapid growth in the dairy industry here, making it the fifth largest in the
nation now. Morrison says there are estimates of some 500,000 milk cows in
Idaho, creating the need for a huge feed base.
Traditional row-crop farmers are also buying land, looking for more acreage to
plant to today's high-priced commodities.
The second group of buyers is the investors. Morrison says there are investors
of all types, looking for something outside the stock market to sock their money
into for a while.
When this rural land is bought it can be a cash deal, a 1031 exchange or
borrowed money. Farmers are often using their existing farms as security to
purchase new land. In eastern Idaho, which is a largely agricultural area, land
on a pivot is bringing $3,000 to $4,000 an acre.
"This spring it seems like every sale is higher than the last," says Morrison.
"This is being driven by historically high commodity prices. When prices return
to normal levels—and I'm convinced they will—the cost of production will be up
so much it will be tight and some people will feel they can't afford what they
paid for the land."
Morrison says he's also concerned the national economy will come to bear on this
robust agricultural economy.
"Right now it's like a 'Tale of Two Cities.' But at some point these two will
come together," he says.
"I think there are going to be a lot of second thoughts about the ethanol
subsidy and how it's driven up the cost of our national food supply. When that
happens, whether it's one year from now or two years from now, it won't be good
for the farm economy."
GEORGIA
Cropland average per acre: $4,440
Cash rent per acre: $60
Compared to two years ago, the amount of farmland changing hands here has really
slowed, says Banjo Davis. Timberland sales, on the other hand, continue to be
strong. Part of the reason, adds Davis, is the recreational value of timberland.
And that's not all that's changed, says this chief appraiser for Southwest
Georgia Farm Credit. Last year 1031 exchange money dried up. It was a move Davis
thought signaled a coming decrease in land values.
"But we haven't seen that happen," he says, crediting those strong timberland
and recreational land sales with holding the interest of buyers.
When farmland sells, high corn prices and new high-contract peanut prices have
bolstered land prices. Farmers are paying $2,800 to $3,500 an acre for irrigated
ground. Dryland is going for $2,000 to $2,800 an acre.
Davis admits that in light of today's high input costs he's concerned about how
farmers will cash-flow land at these prices.
"Often farmers who own land are using that as leverage to pay for the additional
acreage," he says. "But it's kind of a mystery to me how they can make it
cash-flow when input costs are so high."
When asked if he expects land prices to hold through 2008, Davis says he doesn't
have any answers as to how long these high prices will hang on.
"I thought last year that values would start decreasing. But they didn't," says
the veteran appraiser. "We have seen a decrease in the number of properties
sold, but not the prices."
*Land prices/cash rents not attributed to a source are from the USDA's most
recent summary.