Commodity prices influence some Colorado land costs, others remain consistent | TheFencePost.com

Commodity prices influence some Colorado land costs, others remain consistent

Bridgett Weaver

Low commodity prices are beginning to affect agriculture land prices in some Colorado regions, but not as much in Weld and Morgan Counties.

Ryan Hostetler, managing broker at AGPROfessionals in Greeley, said the Weld County market is still very strong, probably due to limited supply.

"The demand for agriculture land and water in Weld County has not diminished," Hostetler said. "There's a very limited supply of farms that come on the market in Weld County."

He said the last farm he sold was for about $12,000/acre, and it had good land and available water.

"We typically see multiple offers on good quality irrigated farmland," he said.

Non-irrigated land is selling for about $5,000/acre.

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"It's still selling as well," Hostetler said. "It doesn't sell quite as quick as irrigated, but there's a large demand for any land in Weld County."

Outside of Weld, things aren't looking as good.

"Farmland in other areas has dropped as much as 20 percent," Hostetler said. "Further east, where the values of farmland are more commodity driven, the prices have fallen off. They were on a steady incline for the last five years, but in the last year they began to see a decline."

Corn prices have been hovering between $3.50 and $4 per bushel in 2016, a recent market low. Most farmers say they can't make money in anything less than a $4 market.

John Stratman, associate broker at Mason Morse Farm & Ranch Company in Denver, said he's seen the affect of low commodity prices in land sales.

"These $3 corn prices and the cattle backing off and the oil and gas backing off has caused some of these properties to pull back in prices," he said. There has been "probably 10-15 percent drop."

A lot of farmers who have land in oil-rich regions have supplemented their incomes by leasing land for oil and gas exploration and development, but with the recent downturn, some of that land is less profitable. Farmers are considering their options.

The properties that can be sold for commercial and residential development aren't dropping in price.

"The properties that can be bought for development or bought for the water for a different use, those properties haven't really been affected by the downturn in commodities," Stratman said.

Although a lot of farmers don't prefer to sell their ag land into development, Stratman said it's generally about the money. If someone wants their ag land conserved, they will put an easement on the deed which requires it to remain agriculture land, he said.

"It's a personal preference, but most people are interested in the money," he said. "I think everybody's concerned about the loss of ag land, but if somebody's selling a piece of property, they're more concerned about the price they're getting for it."

Some areas have more happening on the farmland front than others.

The dairy industry is at least part of the reason the ag land prices in northeastern Colorado have held steady.

Tom Haren, AGRPRO owner, said he deals mostly with dairy farmers looking to move into the area, and there are plenty.

Leprino Foods, the international milk and cheese factory in east Greeley, announced at the beginning of the year it would move forward on its Phase 3 expansion. The operation requires the milk of about 80,000 dairy cows every day, all of which comes from within a 60-mile radius of the factory.

"We've worked with a couple dozen of the dairy farmers relocating them from all over the United States," Haren said. "(Dairy land) is in high demand, but it's not just real estate."

Haren said finding land that works for a dairy operation is very technical.

"We've been going it for 20 years though, so we've got a good track record and a history of what makes good dairy sites."

He said they try to look for non-irrigated land for the cows, and then find a site with water for a production facility.

Don Shawcroft, president of the Colorado Farm Bureau, said he has seen some people selling their farm and ranch land for "trophy ranches."

"It's not bought for its economic productivity but for its aesthetic value, for scenery or hunting opportunities," he said. "They may build a $1 million home there or a summer home and they go there to enjoy the surroundings."

Sales like these give Colorado farmers the chance to sell their land and move to a state that isn't experiencing the same pressure that Colorado is.

In a lot of areas, like Weld County, farmers are just straight up opting to not sell.

"What we're seeing in the better areas like Weld County is people just aren't selling," he said. "If they can't get their prices, they just hold on to it."

Therefore, the low commodity prices have caused a pause in sales for some places.

"In other areas, it's caused downward pressure. In those areas that are more reliant on agriculture," Stratman said. "If they have to sell today they have to take what the market offers."❖

Falling commodity prices (U.S.)

Crop Price per sale unit in 2013 Price per sale unit in 2015 Total change Percent change

Barley $6.06 $5.50 -$0.56 9.25 percent

Corn for grain $4.46 $3.60 -$0.86 19.3 percent

Wheat $6.87 $5.00 -$1.87 27.2 percent

Sunflower $21.40 $18.90 -$2.50 11.7 percent

Dry beans $39.10 $28.70 -$10.4 26.6 percent

Source: 2015 Crop Values Summary, U.S. Department of Agriculture’s National Agricultural Statistics Service