Depending on where you live, your farm is probably worth a lot more than it was a year ago. Gary Crawford has more:
After a decline in the value of farm real estate in 2009, farmers once again are seeing values going up. A new Agriculture Department report shows a big increase in 2010 and into this year. USDA statistician Scott Shimmin told us, ”Overall, all farm real estate is up 6.8%, particularly crop land is driving that, and especially in the mid-west and northern plains.” And when USDA Chief Economist Joe Glauber saw that, he told us, ”I think the surprising thing, of course, if you go to the non-ag economy, of course real estate values have been flat, if not still declining in some areas.”
But certainly an increase in farm land values was a natural thing to have happen, ”I think they're certainly consistent with the low interest rates that we’ve seen, and consistent with the high farm income that we’ve seen.” And consistent with where those high priced corn and soybeans are being grown, ”Nebraska for example, I think we’re showing farm real estate up 17%, and certainly the upper mid-west, the Dakotas, you know, increases over 15%, Iowa up 24%, so just some very, very large increases.”
So large, it has some people a little bit worried. People who remember the big run-ups in land in the 1970s, and then came the crash in farm product prices and the farm economy, ”Unfortunately, some farms had been loaned money on the equities that they’d earned on their appreciating land values were all of a sudden caught in a very tight squeeze.” And you had what they called the Farm Crisis.
But, Joe Glauber says that while land values do bear watching, we don’t have the same conditions as in the 70s and 80s, it’s not as easy for farmers to get in debt over their heads these days, ”Certainly it looks like most loans are being looked at very carefully, they’re looking at the ability to cash-flow the loan, and I think if you look and remember that we have a very, very low debt to asset ratio in general in the farm economy.” Then it’s not likely that rising land values are that much to worry about, and Glauber doubts that we’re going to be seeing these kinds of run-ups in land values every year, ”If we were to see a downturn in farm income, or suddenly some increases in interest rates, that certainly could have affects on farm land values.” And even a possible reduction in farm supports in the next Farm Bill could have some cooling effect on the value of farm real estate.
Gary Crawford, Washington, DC