Falling land prices hurt farmer's dell
Last year marked the first decline in agricultural land prices in 20 years.
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NEW YORK (CNNMoney.com) -- Farmer Brown finally got hit by the real estate recession last year, well after its impact had been absorbed by his urban countrymen.
The values of farmland and buildings fell in 2008 for the first time in 20 years, according to a report released this week by the U.S. Department of Agriculture. The price of land fell 3.2% to an average of $2,100 per acre as of Jan. 1, 2009.
The downturn was a departure from steady, even spectacular, increases recorded by agricultural real estate prices over the past nine years. Even at these depressed prices, the average per-acre price is still almost double what it was in 2000, when it was $1,090.
"Cropland values stayed strong due to strong commodity prices," said Scott Shimmin, an agricultural statistician for the USDA. "The leveling off or softening of farm prices this year doesn't surprise you in the context of the overall economy. Farmland is not immune from the effects of the recession."
Both cropland (acreage devoted to raising corn, wheat, cotton, vegetables and other products) and pastureland (land devoted to grazing) declined in value during the year. Cropland fell 1.9% to $1,070, while farmland was down 3.9% to $2,650.
Still, farm values have held up much better than residential real estate. Home prices dropped more than 18% last year, according to the S&P/Case-Shiller Home Price index, and more than 30% since they peaked in the summer of 2006.
The report cited a few reasons for the farm value decline, but one primary factor was that commercial and residential developers were not seeking agricultural land to turn into new housing and office park developments.
In addition, lower farm product prices reduced farmers' profits, making them less optimistic about their short-term prospects and less eager to buy additional acreage. The recession also reduced states' and cities' demand for converting land into recreational uses.
Despite the decrease, the typical U.S. farm is still worth a nice piece of change. The average farm is 418 acres and, at $2,100 an acre, worth $877, 800.
The most expensive land is in the Northeast. In Rhode Island, farms are valued at an average of $15,300 an acre; in New Jersey, $13,800 an acre; and Massachusetts and Connecticut come in at $12,000 per acre.
The cheapest farmland is in the Mountain states, such as New Mexico ($460), Wyoming ($520) and Montana ($700). Most of the farmland in those states is considered less valuable pastureland. When just considering cropland, Montana came in the cheapest at $787 an acre, followed by North Dakota at $800 an acre.
The state with the most money invested in agricultural land value is Texas, with more than $202 billion. California farmers have land and buildings worth about $164 billion. The only other states with farm value in the hundreds of billions are in the Corn Belt: Both Iowa and Illinois have nearly $122 billion in farm value.