Price of Farmland

[smstonypoint]

As a further point can anyone give the pay rates for the same job 25 years ago and now?

From http://research.stlouisfed.org/fred2/data/AHETPI.txt, the nominal "Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private Sector" were $9.77 in June of 1989 and $20.58 in June of 2014.

The BLS publishes wage data by occupation, but I am not sure about how far back those data go.

Steve

 

[dave1949]

We bought our property for $2250 per acre 5 years ago. An adjoining tract of 11 acres sold for $5500 compared to asking of $7500. Less than half a mile from me is a developer selling 3 acre parcels in an 80 acre tract development for $9500 per acre and has sold several lots but so far no one is building on them. There are a lot of acreage lots going in now in my area. This is prime retirement property with quiet areas, almost no crime and fairly low property taxes (but has a state income tax), most contain at least some wooded areas so prices are jumping up quite a bit in the last few year.

I get the feeling, with no data to support it :laughing:, that there is a growing pent-up demand for new housing land. I would expect that building lots in commutable locations will experience a boom of sorts when and if the general economy supports it. And supposedly, there is also a growing backflow of people from the burbs to more central city areas among retirees. I also think retiring boomers who want to live in truly rural settings are over-represented here on TBN compared to the overall population.

Still, it's a shame to see perfectly good farm land being built on as metropolitan areas expand. That is what I see back home in Ohio, houses and mini-subdivisions popping up over the years to the point that comparing now to 30-40 years ago is quite a change. I can only guess what it must be like in more attractive areas with higher growth rates. If Ag is hollowed out to a large enough extent in an area, it tends to collapse entirely because Ag service providers no longer have a large enough market to support themselves, which in-turn drives up producer's costs in a vicious circle.

 

[bigbull338]

usable farm and ranch land is high i dont care what part of the country your from.its sad to see big farms sold off in smaller tracts.1 day the land will all be gone and thatll be it.because their not making anymore land.

 

[whistlepig]

Mostly prime farm land here. Mega farmers are buying or renting this ground. Many places around here with a house and barn and a lot of land have the house and barn rented to someone. The ground is worked by someone else.

 

[MossRoad]

David,

$8571/$1500 = 5.714, not 8.5.

$100 invested 25 years ago would have a value today of $571.40 if had earned a rate of 7.22% with annual compounding.

$100 invested 25 years ago would have a value today of $850 if had earned a rate of 8.94% with annual compounding.

AH -- the magic of compounding.


In what county are the tracts located?

Steve

Yeah, I swaped the 5.8 and 8.5 in my excitement. Still shockig to me.
I'm no sure if its St. Joseph or Mashall counties... right near the county lines

 

[smstonypoint]

Yeah, I swaped the 5.8 and 8.5 in my excitement. Still shockig to me.
I'm no sure if its St. Joseph or Mashall counties... right near the county lines

Using USDA's QuickStats (USDA/NASS QuickStats Ad-hoc Query Tool), 2013 non-irrigated crop rental rates averaged $165/acre in Marshall and $160/acre in St. Joseph. Using the average of the two counties ($162.5/acre) gives a capitalization rate of 1.90% for the land sale. That's very low by historical standards. However, the property in question may have a high yield potential and demand a high rent.

Steve

 

[MossRoad]

Using USDA's QuickStats (USDA/NASS QuickStats Ad-hoc Query Tool), 2013 non-irrigated crop rental rates averaged $165/acre in Marshall and $160/acre in St. Joseph. Using the average of the two counties ($162.5/acre) gives a capitalization rate of 1.90% for the land sale. That's very low by historical standards. However, the property in question may have a high yield potential and demand a high rent.

Steve

I'm fairly certain the land that was purchased will remain farmland. I just don't see how they will ever be able to pay it off the way equipment, fuel, labor, grain prices, etc... all add up. The economics of industrial farming... I suppose if they already had the cash, then they are only concerned about ROI. Still can't imaging how any young person could ever afford to get started as a farmer without going heavily into debt.

 

[300UGUY]

I'm fairly certain the land that was purchased will remain farmland. I just don't see how they will ever be able to pay it off the way equipment, fuel, labor, grain prices, etc... all add up. The economics of industrial farming... I suppose if they already had the cash, then they are only concerned about ROI. Still can't imaging how any young person could ever afford to get started as a farmer without going heavily into debt.

Farmland around here is up to 10K per acre, maybe more. I think a lot of the buyer's think in a different way than most folks, all the farmer's I know inherited their ground. And when they buy some land, it isn't what it is worth to them, it's so that their kids and grandkids can farm it. ROI is involved, but it is a multi generational calculation. One guy told me that ground next to his might not come up for sale again in his lifetime. All these guys know each other, and many are related, so everybody knows who wants what. I can't see how a young person, without inheriting, can go farming. Not just the land, but all the inputs are much higher than years past.

As far as borrowing money to start a farm, who would loan a young person the money?

 

[KiotiKowboy]

Around here, pasture land is bringing about $2500 an acre. Most of it is used for grazing or hay production. I'm not sure how that equates to "farm" land.

 

[smstonypoint]

As far as borrowing money to start a farm, who would loan a young person the money?

The USDA has loan programs for young and/or beginning farmers -- Beginning Farmers and Ranchers Loans.

Steve