Despite drops in commodity prices, land values not falling off in Colorado | TheFencePost.com

Despite drops in commodity prices, land values not falling off in Colorado

Eric Brown | The Fence Post

Cows in the grassland

While a number of Midwest states are starting to see farm land values level off and even drop some, the same can't be said for Colorado.

A number of experts with a close eye on the local land market say that, while land isn't seeing the historically sharp increases in value it saw in recent years, Colorado ag ground is still on an upswing.

"It's definitely not dropping off," said Jerry Lebsack with Premier Farm credit in Yuma, Colo., who noted that the past half-dozen sales of pivot-irrigation ground he's seen in his area were in the $8,500 to $10,000 per acre range. "I'd say we're still seeing a slight increase."

The same goes for Weld County, Colo., the state's most ag-productive county.

Numbers showed that recently, in 2012, farmground under center-pivot irrigation in Weld sold for about $7,000 per acre — about a 45 percent increase from what it was in 2011. And, Tony Miller, vice president at Firt Farm Bank in Greeley, said he's seeing farmground in the county now selling for more than that — going in the $8,500 to $9,000 per acre range.

"You're starting to see some leveling off in other places, like the Midwest," Miller said. "But not here."

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For some time, a number of agriculture economists, particularly those in the Midwest, have said that 2014 would be a turning point for land values, which have been increasing rapidly in recent years.

Among the factors that will affect land values, they've said, are increasing interest rates, tightening margins and lower commodity prices.

"If you run these numbers through a model, I'd say we'll see 15 to 25 percent lower prices on land over the next three to five years, if these kinds of conditions prevail," Chris Hurt with Purdue University said back in December during the Indiana-Illinois Farm and Outdoor Power Equipment Show.

That's not the case in Colorado thus far.

Miller explained that Colorado's rapid municipal growth on the Front range, the increasing value of water in Colorado and uptick in oil and gas activity has kept land values high in his neck of the woods.

And while corn prices have fallen from $8 per bushel in recent years to under $5 per bushel more recently, which has impacted land values in the Midwest, cattle prices and dairy prices are strong, which bodes well for Colorado — Greeley, for example, is home to JBS USA, one of the four-major meat packers in the nation, and also Leprino Foods operations, which is the largest mozzarella cheese processor in the world.

"We produce some commodities around here that are still doing well … so people are optimistic around here," Miller said.

Even if ag land values do begin to fall, as some economists have predicted, experts don't fear a fallout. While some concerns linger about a potential ag-land bubble burst, most think any approaching drop in land prices is unlikely to be as sharp as in past decades.

Despite a 39 percent increase in the amount of debt held by U.S. farm businesses between 1992 and 2011, U.S. farms are now situated in a stable financial position, thanks to improving income and historically low interest rates, a pair of recent USDA farm income and ag management surveys showed.

USDA's Farm Costs and Returns Survey and Agricultural Resource Management Survey provided the data for a recent summary of the farm sector's financial situation and outlook, prepared by USDA agricultural economists Kevin Patrick and Jennifer Ifft.

The two economists say that while debt use and leverage varies widely, most farm businesses are better prepared to handle unexpected changes in farm income or interest rates than they were in the 1990s — hopefully poised to avoid any similar situations to the 1980s farm economy fallout. ❖