Commodity prices driving up cost of farmland
March 29, 2011
High prices for corn and wheat are driving up the cost of farmland in Colorado and the nation, but along the northern Front Range little is available for sale.
A recent survey conducted by the University of Nebraska indicated the average values of farmland in that state have increased by 22 percent in the past year, and while Colorado State University does not conduct the same type of survey, a CSU agricultural economist estimates Colorado farmland – both dryland and irrigated – has seen an increase of between 8 percent and 10 percent from 2010.
“Seven dollar corn and $10 wheat is just driving stuff crazy,” Norm Dalsted said. “It’s just going out of sight.”
He said he’s heard of irrigated farmland selling for $6,000 an acre in Morgan County recently. And, he said, there was some 700 acres near Brush still in the federal government’s Conservation Reserve Program – taken out of production to prevent erosion – that sold for $874 an acre.
“It’s still in CRP, not in production,” he said in amazement.
In the nation’s cornbelt, Dalsted said he’s seen reports of farmland selling for $10,000 an acre or more in Iowa.
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Jim Miller, the assistant commissioner of agriculture, said the only farmland real estate figures available for Colorado come from an annual survey released each August by U.S. Department of Agriculture’s National Agricultural Statistics Service. For August 2010, that survey indicated the average value per acre in the state declined by 0.8 percent from 2009 to 2010 and irrigated farmland decreased by 1.6 percent for the same period. The average cost of irrigated cropland in 2010 was $3,100 an acre, down from $3,150 in 2009.
The same survey indicated all Nebraska farmland increased by 10.6 percent while irrigated cropland had gone up 13 percent.
The annual University of Nebraska survey revealed the biggest increase in farmland in the central and eastern part of the state – the primary cropland – ranging in increases from 21 percent to 25 percent in the past year or from $2,183 per acre to as high as $4,625. The northwest, north and southwest areas of the state saw increases of 12.3 percent, 18.1 percent and 13.9 percent, respectively.
Bob Kreps with Kreps and Wiedeman Auctioneers and Real Estate of Greeley said those Nebraska figures are a better indicator of agricultural production, whereas the farmland along the Front Range of Colorado is being bought more for its water than for growing crops. And it’s not farmers who are buying the farmland that does become available.
“Unless you are a big operator and can tie any farm in with what you have, there just isn’t much land available,” Kreps said. “I haven’t sold any to farmers in some time because they just can’t justify the price they would have to pay for irrigated land; it just doesn’t pencil out.”
Add that to the oil boom that has exploded in Weld County in the last year, and land owners, while they can sell mineral rights, are holding onto their land, he added.
The price of Front Range farmland reflects, he said, on the value of the water that comes with it. Those farms for sale are being bought by investors or metropolitan cities. Some of that water, Kreps said, may be leased back to the farm, but for how long is the question.
“Unfortunately, the days when young farmers are able to go out and buy a farm to get started are gone,” Kreps said. “People want to buy farms for the water and not farm. That’s the sign of the times, whether that’s good, bad or otherwise.”