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Farmland Prices Hit Records
Thursday, August 22,2013 Farmland prices hit records Market may slow from higher interest rates and fewer exports BY PATRICK YEAGLE Record farmland prices continue in Sangamon County, but agriculture observers say the rise may be slowing down. The rising prices follow a nationwide trend driven by low interest rates and solid demand for crops, says John Hawkins, spokesman for the Illinois Farm Bureau. However, farmland prices may level out as interest rates rise, exports fall and profits on corn and soybeans get slimmer. Hawkins says farmland prices grew steadily for 30 years, but the past five years have seen a faster rise in prices. In central Illinois, farmland routinely goes for $10,000 per acre or more, Hawkins says. The increase likely came from strong demand for corn and soybeans from Europe and China, while ethanol drove commodity prices higher domestically. However, those markets have now slowed, Hawkins says. And the prospect of a larger total harvest means less profit for individual farmers because commodities become cheaper, he said. “We may be getting to point where we’re going to take a pause,” he said. “We’re supposed to have a good harvest this fall. If we have another good harvest next year, that could lessen farm income greatly, and that would probably throw cold water on land prices.” Allen Entwistle has farmed land in the Springfield area for about 50 years. He says he recently saw a tract of land near Edinburg, southeast of Springfield, go for $16,800 per acre. The plots with the best soil and drainage get the highest prices, Entwistle says, while low grade “class c” land goes for far less, often being used for hunting instead of farming. The high prices can be a hurdle for smaller operations or potential new farmers, Entwistle says, noting that it’s not uncommon to put more than a million dollars into a farm. That money often comes from a bank or a wealthy investor, who face big risks along with the farmer if the crop fails. Still, the risk is well worth the reward for many farmers, as the U.S. Department of Agriculture estimates that 2013 will bring $128 billion in total profit for America’s farmers – more than double the $63 billion earned in 2009. During the recession, farmland prices increased while other forms of real estate like commercial and residential tumbled, which Entwistle attributes to the land’s inherent value. “A house depreciates unless you’re constantly spending money on it,” he said. “That ground is always worth whatever you pay for it because land is limited. They’re building new houses every day, but scientists haven’t figured out how to make more land.” Contact Patrick Yeagle at pyeagle@illinoistimes.com . Continue reading
‘Staggering growth’ In Farmland Prices
Fri 23 Aug 2013 The cost of Welsh farmland rose to £7,250 per acre in the first six months of this year Credit: Frank May/PA The cost of Welsh farmland rose to £7,250 per acre across the country in the first six months of 2013, says the Royal Institution of Chartered Surveyors (RICS). The latest RICS Rural Land Market Survey found that the growth was driven by the ongoing surge in demand from both farmers and investors. Ben Collins, RICS Wales director, said: “The growth in farmland prices in recent times has been nothing short of staggering. In less than 10 years we’ve seen the cost of a square acre of farmland grown to such an extent that investors – not just farmers – are entering the market. “And, if commodity prices continue to increase and keep demand high, we could see this trend continuing, with cost per acre going through the £10,000 barrier within the next two to three years.” David Powell, of Powells, Monmouth, said: “There is continued demand for good, well located blocks of good land close to farming base of purchasers. Good grazing/mowing land and arable land selling well and at premium values where local demand is strong.” Continue reading
The Value Of Farmland Reaches A Record High
The price of farmland in the region has soared to record levels and is expected to tip £10,000 for an acre in the next two or three years, market experts say. During the first six months of the year, the cost of farmland in Yorkshire and Humber jumped to £7,000 per acre, bringing the value to almost three times what it was during the same period in 2004, when an acre in the region cost just over £2,613. The exponential growth in prices, revealed by the twice yearly RICS Rural Market Survey, has been driven by the ongoing surge in demand for land from both farmers and investors. Sue Steer, RICS rural spokeswoman, added: “The growth of farmland prices across Yorkshire and Humber in recent times has been nothing short of staggering. In less than ten years we’ve seen the cost of a square acre of farmland grow to such an extent that investors – not just farmers – are entering the market. And, if commodity prices continue to increase and keep demand high, there’s no reason at all why we won’t see the cost per acre going through the ten thousand pound barrier in the next two to three years.” Interest from potential buyers started to steadily grow at the beginning of 2006, RICS say, with hikes in commodity prices leading a charge to expand agricultural operations and, as a result, investors are increasingly seeing land as an economic safe haven. With bare farmland so sought after, the six months to June saw availability of such farmland remain flat. Across Great Britain, land prices were highest in the North West at £8,813 per acre, while the cost per acre was lowest in Scotland at £4,438 per acre. Tom Whitehead, senior associate at property agents Carter Jonas in Harrogate, said: “The regional market has surged into activity since mid-May with a good mix of bare land and equipped farms of varying calibre now available. Reasonable quality bare arable land in blocks of 50 to 150 acres is highly sought after commanding a 20 per cent to 50 per cent premium over ‘average’ prices, with weaker demand for farms with a strong residential element or in less fashionable districts.” Respondents to the professional body’s survey in Yorkshire and Humber expect the trend of rapidly growing farmland prices to continue over the coming year with a net balance of 67 per cent more chartered surveyors predicting further growth. Barney Kay, regional director of the National Farmers’ Union, said big investment funds listed on the stock exchange had invested capital in farmland since 2008 as a result of the economic crash. He said: “For many in the industry, high land prices provide a stronger basis against which to invest in infrastructure and machinery but for those younger people entering the industry and looking to expand it makes it a lot harder to buy land.” Chance to reduce arrears? Farmers who are struggling after inclement weather last summer and earlier this year could use high farmland prices to boost their finances, says Andrew Black, rural expert at Savills in York. Mr Black says: “While large farm businesses may have the reserves or borrowings to cope, smaller enterprises may struggle. Sale and leaseback could be a very sensible option to consider. Investors need someone to farm their asset, so farmers can generate capital by selling and continue with a livelihood that they love.” Continue reading
