The value of
The news brings with it a mixed bag of emotions, says Bob Boehm, manager of the Michigan Farm Bureau (MFB) Commodity and Marketing Department. On the plus side, the rise reflects an increase in the prices farmers are paid for their commodities and a healthy agricultural economy. On the down side, land prices are going up along with nearly every other farm production expenditure, including dramatic increases in costs for energy products such as fuel and petroleum-based fertilizer.
"Crop prices have a fairly rapid impact on cash rental rates, as the per-acre returns increase the level that can be allocated to land costs," said Boehm. "With the general rise in commodity prices of both crops and livestock, an improving profitability picture creates additional demand for farmland, which has pushed prices higher. Also, low interest rates over the period mean the same cash flow can support a higher purchase price with less of the payment allocated toward interest."
In times like these, farmers have more incentive — and more financial wherewithal — to expand their acreage, and this growing demand from agricultural buyers and renters drives up prices as well. This runs counter to the norm because most often farmland brings a higher value for its residential or commercial development potential, not its use for agricultural production. But in today's climate, keeping land in agriculture can be just as profitable as selling to developers.
"The weaker economy in
While the U.S. Department of Agriculture predicts U.S. net farm income will reach a record $87.1 billion this year, total cash farm expenses are pegged at $222 billion, an 8.5 percent increase from 2006, due in large part to rising energy prices which have driven up fuel and oil prices 4.5 percent and fertilizer 17 percent.
Last year alone, the average
"The commodity price increases we're seeing are offset with escalating production costs for the basic necessities that farmers require to produce their commodities, and that includes buying and renting farmland," said Boehm.
On a bigger scale, NASS looks at
For cropland value, the Lake States region saw a 15.7 percent increase to $2,950 per acre. In comparison, the average value of cropland in the
Cropland cash rents in the Lake States region increased $5 from last year to $85. The cropland cash rents in the states bordering