Higher commodity prices continue to nudge U.S. agriculture toward larger-sized farms and create crop production shifts to better maximize farmland use and improve farmers’ profit potential.
That is the bottom line from a panel of farmland value experts who addressed land value trends for several regions of the country during the 2011 American Society of Farm Managers and Rural Appraisers’ (ASFMRA) annual meeting held in Phoenix, Ariz., this fall.
Here is a breakdown of farmland values and changes tied in part to higher commodity prices in the West, Southern Plains, Mid-South and Mississippi Delta. The information was gathered from surveys and industry polling.
Steve Runyan of Runyan Appraisal Service, Bakersfield, Calif., discussed farmland values in California, Arizona, Washington, and Oregon.
Runyan says some California farmland values have increased up to 20 percent per acre in the last 12 months; largely for land in permanent crops including almonds, pistachios, and grapes.
“The strong almond, pistachio, and table grape markets over the last four to six years have increased land values,” Runyan told the crowd. “If there was more (land) supply there would be more sales due to the huge demand. There are enough buyers knocking on the doors that if its (priced) reasonably they’ll buy it.”
California citrus land values are stable to slightly higher.
In Arizona, overall farmland values have stabilized after declines in 2008 and 2009. The largest gains are in southwestern Arizona where crop production is year round, including winter vegetables.
In Washington and Oregon, farmland sale figures remain low while overall farmland prices are rising. Prices for orchard-quality irrigated land in Washington can fetch up to $8,000 per acre. Oregon land prices are 10 percent to 15 percent higher over the last year with limited sales.
Western farmland sellers are local farmers, those who recently inherited land, and some development speculators. Buyers are mostly interested in expanding existing farm operations.
Merrill Swanson of Dugger, Canaday, Grafe, Inc., San Antonio, Texas, reported on farmland values in Texas, New Mexico, and western Oklahoma.
Texas’ extreme drought has had an impact on farmland values over the last year. Swanson reported steady to uneven land prices for medium and lower quality land yet a price uptick for better land quality with good water.
The drought has brought sales of cropland with weak irrigation water almost to a halt. Most land sales are private treaty through brokers.
After the recession began, Swanson said farmland sales volume dropped almost in half. Land values dipped from 10 to 20 percent. Sellers reduced prices to sell land.
“In Texas, I think our farmland (value) has increased a little bit in 2011,” Swanson said.
In New Mexico, Swanson reported reduced sales activity this year versus last year.
Sellers of Southern Plains farmland are typically third-generation owners or those who bought land five to eight years ago. Buyers include investors diversifying assets and farmers who generated good profit in recent years.
“Despite the Texas drought, I believe high commodity prices will likely offset production losses and keep land values steady to slightly higher particularly if the drought appears to ease,” Swanson said.
Land rental rates in the Southern Plains are strong for available grass or hay acreage. The trend is toward more cash leases yet crop share remains popular.
Panhandle cropland leases average from $200 to $220 per wet acre for pivot-irrigated land with good water, $150 to $175 per wet acre for pivot irrigation with average water, and $85 to $125/acre for pivot land with weak water depending on equipment.
Farmland buyers include farmers who want to expand the operations.
Mid-South and Delta
The Mid-South and Delta include southeastern Missouri, eastern Arkansas, west Tennessee, the Mississippi Delta, and northeastern Louisiana.
George Baird IV of the Land Management Group, Collierville, Tenn., says farmers are changing cropping systems to improve profit potential related to higher grain prices and new technology. Some farmers are shifting ground from cotton and rice to more soybeans, corn, wheat, and grain sorghum. Emerging crops in isolated areas include melons, potatoes, and other vegetables.
“With new (plant) varieties and technology we can make almost any property productive,” Baird said. “Now we are seeing buyers start to recognize the different quality of land based on improvements. It helps us manage the weather risks much better.”
Land improvements include drainage, irrigation, fertility, grain facilities, and farm shops.
While the demand for land sales in this region has seen a dramatic increase over the last two to three years, Baird says a notable increase in market transactions has occurred in the last six-to-twelve months. The overall size of each transaction continues to push higher.
Most overall sales are landlord-tenant transactions or private treaty. There are a few public auctions in the extreme northern parts of Arkansas and southeast Missouri.
Higher quality land will continue to fetch higher prices. Barring a major outside market occurrence, Baird expects values for all land to move higher over the next six months. He believes high quality, developing tracts could push 6 percent to 8 percent higher over the next six months and more than 10 percent higher over the next 12 months.
“If we look at our production capability — prices, land and water, and the environment — I think the Mid-South is just starting to hit their stride on land values,” Baird said. We haven’t even begun to see the numbers we can produce like the Midwest has.”
About 500 farm managers, rural appraisers, and industry members attended the ASFMRA annual meeting.