Aug 07, 2008 - 04:06:14 CDT
The average value of farm real estate in North Dakota has set a record for the fourth straight year, driven primarily by high commodity prices that have fueled a demand for land.Industry officials say producers in the state who are taking advantage of the good times in agriculture to expand their operations are assuming some risk. But they say the chance of a repeat of the 1980s farm economy collapse is small, even if crop prices crash.
"The big difference now from the land boom in the 1980s is that a lot of the land is paid for with cash," said Dwight Aakre, a farm management specialist with the North Dakota State University Extension Service. "There's not a lot of leveraging like in the '80s."
Scott Tewksbury, incoming president of the Independent Community Banks of North Dakota, said most of the farm land loan requests seen lately at his Edgeley bank have been from "well-established" farmers, not those just getting into the business.
"The people that we've financed lately have had substantial cash equity for their purchases," he said. "There's more true money being made than there was in the '80s. If they're putting substantial equity - we're talking 60 percent - down, I think the equity position is strong enough that the risk is manageable."
Farmers have been able to buy land lately because of record crop prices that have boosted farm income, and finance rates have been favorable over the past several years, Aakre said.
The average value of North Dakota farm real estate is up nearly 18 percent from last year, to $765 per acre, according to the Agriculture Department.
The average, which includes farm land and buildings, increased for the ninth straight year. Since the 2004 figure of $455 per acre, which was equal to the 1982 average, a record has been set in North Dakota every year, said Brian Kugel, a statistician with the North Dakota Agricultural Statistics Service.
North Dakota has one of the lowest farm real estate values in the nation. With its weather extremes, "We have a relatively risky climate to produce crops in," Aakre said.
"Consequently we've had maybe a little more room to increase (in values) than most states on a percentage basis," he said.
North Dakota's 19.4 percent rise over the year in crop land value was behind only Nebraska and South Dakota.
USDA said the average value of North Dakota crop land is $800 per acre, and pasture values have climbed to $350 per acre. Both are up more than 16 percent from last year.
The average cash rent value for crop land in the state is $45 per acre, up about 10 percent from last year. Cash rent for pasture averages $13.40 per acre, up 90 cents.
Nationally, USDA said farm real estate values averaged a record $2,350 per acre in January, up about 9 percent from 2007. The agency cited strong commodity prices, farm programs and tax incentives among the reasons for the increase.
In some states, particularly in the northeastern U.S. and the West Coast, urban development is pushing the demand for land, Aakre said. In North Dakota and many other agricultural states, he said, "the overall driving force is the need to gain economies of size."
Larger farms can more easily weather the effects of soaring fuel and fertilizer prices. Aakre also said that as farm equipment gets bigger, more sophisticated and costlier, "(it) requires a little more land to make it work."
PMS wrote on Aug 8, 2008 4:40 AM:
farmers wrote on Aug 7, 2008 12:18 PM:
snoller wrote on Aug 7, 2008 10:15 AM:
farmers wrote on Aug 7, 2008 9:31 AM:
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