Are Cropland Prices Really Rising?

As a farmland real estate expert, I read with interest an article in the Pioneer Press titled "Survey dispels idea that cropland prices are soaring", published on May 11, 2011. The article examines findings from Steve Taff, a University of Minnesota researcher, who looked at farmland sales from the first nine months of 2010.

Based on Taff's research, the median sales price of farmland fell 7 percent in 2010, to $3,030 per acre. Here is the text from the article, written by Tom Webb:

"In a booming ag economy, did the price of Minnesota farmland really fall in 2010?

A new statewide survey says yes. But the numbers leave room for a debate that is sure to follow in a hundred small-town coffee shops around Minnesota.

Thanks to galloping grain prices, the recent chatter in farm circles has been about the soaring price of cropland. But Steve Taff, a University of Minnesota economist, doesn't pay heed to chit-chat. Instead, he examines data from every sale of farmland across all of Minnesota, some 1,150 transactions in all.
In the first nine months of 2010, the median sales price of Minnesota farmland fell 7 percent, to $3,030 an acre, Taff found. His report was released Wednesday, and Taff knows the skeptics won't believe it.

"I think all the enthusiasm is based on a handful of sales that get repeated over and over again," Taff said. "We've got a depressed market in some parts of the state."

There are wrinkles. Regions with the most prime cropland, like south-central and southwest Minnesota, did report rising farmland prices. More dairy-intensive regions reported declines.
Plus, Taff's survey doesn't cover the final three months of 2010. Those data will come later. But the big run-up in grain prices in 2010 really didn't begin until mid-summer, so the data miss any effect.

Still, Taff knows there have been some much-talked-about farmland sales - and he can name them. An 80-acre parcel in Martin County sold for $8,000 an acre. A 40-acre parcel in McLeod County sold for $7,500 an acre, as did 80 acres in Blue Earth County. In Nicollet County, a 65-acre parcel sold for $7,000 an acre.

Those are exceptions, Taff says. Yet, they've misled landowners into thinking every parcel is selling for a record price. And that is contributing to a big drop in the number of land sales.

"People who think their land is going to sell at one of these high prices...they put up their sign, and nobody is willing to buy it at that price," Taff said. "So they take it off the market. We see kind of discouraged sellers, in some respects." 

The full report is available at landeconomics.umn.edu"

After getting a full read of the article, it's easier to understand how farmland prices could be going down - the context is key. Land prices appear to be declining in the northern parts of the state; while they are still going up in our part of the state. In west central and southwest Minnesota, prices are remaining high.

If you are ready to sell your land, or would like an appraisal done to see what your land is worth, please contact me at 320-894-7528 or noah@farmlandman.com. I'd be happy to help.

Take care,

Noah Hultgren
The FarmlandMan.com

Ethanol Policy

I received a press release the other day that I thought would be worth passing on. It is copied below, including contact information if you'd like more information:

Ethanol: The Right Policy for Combating Oil Prices for Food and Energy Security
WASHINGTON (April 14, 2011) – The following statement was released today by the National Corn Growers Association, the Renewable Fuels Association, Growth Energy and the American Coalition for Ethanol in response to Thursday’s Policy Forum on Corn Ethanol Policy in the 112th Congress.
“Any energy policy forum must include comprehensive and adult conversations about America’s entire energy agenda, including subsidies and other supportive policies for mature and aging technologies like petroleum. Unfortunately, it is unlikely this ‘forum’ will include any of those discussions. Rather, this is yet another example of defenders of the status quo wasting the time of Congress focusing on bogus claims against the ethanol industry instead of finding solutions to the real problems.
“Anyone who has filled a gas tank the last few months has unwittingly witnessed the prime cause of soaring prices for all consumer goods, especially food. The last time corn and food prices rose, the Congressional Budget Office found that factors other than biofuels were responsible for as much as 90 percent of the hike. The World Bank and the government of the United Kingdom have concluded that speculation and energy prices were chief drivers of the 2007-08 spikes in commodity and food prices. How anyone can point fingers at farmers for driving up food prices when they receive less than 12 cents of every food dollar defies common sense.
“Ethanol is the only viable solution we have today to help with our country’s energy security and independence. Today, when it can easily cost over $50 to fill a gas tank, critics would be wise to remember that domestic ethanol actually has helped motorists by lowering gas prices by estimates as high as 40 cents per gallon. To put it in even better perspective, the value of the crude oil displaced by U.S. ethanol amounted to $34 billion in 2010 – money that stayed in the American economy. In the end, that’s the best way to support food and energy security, not through holding make-believe one-sided policy forums.”
The group pointed out that, according to the Institute for Local Self Reliance, 75 cents of every dollar spent on biofuels re‐circulates through the local economy while 75 cents of every dollar spent on oil exits the local economy and, in most cases, the country.

For More Information Contact:
Janice Tolley Walters, NCGA, (202) 628-7001 or walters@dc.ncga.com
Matt Hartwig, Renewal Fuels Association, (202)289-3835 or mhartwig@ethanolrfa.org
Kristin Brekke, American Coalition for Ethanol, (605) 334-3381 or kbrekke@ethanol.org
Stephanie Dreyer, Growth Energy, (202) 545-4000 or sdreyer@growthenergy.org

About the National Corn Growers Association
Founded in 1957, the National Corn Growers Association represents 35,000 dues-paying corn farmers nationwide and the interests of more than 300,000 growers who contribute through corn checkoff programs in their states. NCGA and its 48 affiliated state associations and checkoff organizations work together to create and increase opportunities for their members and their industry. For more information, visit www.ncga.com.

About Growth Energy
Growth Energy is a group committed to the promise of agriculture and growing America's economy through cleaner, greener energy. Growth Energy members recognize America needs a new ethanol approach. Through smart policy reform and a proactive grassroots campaign, Growth Energy promotes reducing greenhouse gas emissions, expanding the use of ethanol in gasoline, decreasing our dependence on foreign oil, and creating American jobs at home. More information can be found at GrowthEnergy.org.

About the American Coalition for Ethanol
The American Coalition for Ethanol (ACE) is the grassroots voice of the U.S. ethanol industry, a national advocacy association for the ethanol industry with nearly 1,500 members nationwide, including farmers, ethanol producers, commodity organizations, businesses supplying goods and services to the ethanol industry, rural electric cooperatives, and individuals supportive of increased production and use of ethanol. For more information about ethanol or ACE, visit www.ethanol.org or call (605) 334-3381.
About the Renewable Fuels Association
The RFA is the national trade association for the U.S. ethanol industry. Since 1981, the RFA serves as the voice of the ethanol industry, providing advocacy, authoritative analysis, and important industry data to its members, Congress, federal and state government agencies, strategic partners, the media and other opinion-leader audiences. For more information visit www.EthanolRFA.org.

Farm Incomes Up

According to analysis from the Minnesota State Colleges and Universities (MnSCU) system and the University of Minnesota, 2010 was a better year for farming than 2009. Much of the gain was due to increased profits in hog farming, but crop farmers also had a profitable year in 2010.

The positive news was based on the responses of about 2,450 farmers in the state, who report in to the "FINBIN - Farm Financial Database." The FINBIN website is located here:

http://www.finbin.umn.edu/

And is definitely worth exploring. Out of curiousity, I checked on land rent rates for corn farmers in Minnesota. In 2010, the average land rent cost was $143.62, which was about right (maybe even a little low) for our area. I looked at sugar beets, and the land rent average was $104.07 in the state - but that is obviously low for our area. Instead, I looked just at Kandiyohi County and the surroundiung counties, and the average land rent was $166.10 in 2010 - which sounds a lot more realistic for this region.

In addition to land rent costs for specific crops, the FINBIN database also includes information on other expenses ranging from seed and fertilizer to custom farming and hired labor to machinery leases and repair expenses. It's a great set of data for benchmarking your operation.

If you want help with farm management or appraising your agricultural land in the face of rising land rent prices and increasing farm profits, please give me a call at 320-894-7528. Weather permitting, I'll be in the fields for planting soon, but I am still available to help you with all of your real estate needs.

Warmest,

Noah Hultgren
The FarmlandMan
www.farmlandman.com

p.s. Congratulations again to the MACCRAY Boys Basketball team on finishing 3rd in State! As a former Wolverine basketball player on the last team that went to state (in 1996), I was proud to watch all of the games and excited to see us so well-represented!