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Wednesday, July 30, 2014

Despite trend, farmland values are up

Saturday, March 1, 2008

Increase in value is attributed to higher crop prices

SIKESTON -- Studies show that while some real estate values across the country have been falling or remaining flat, prices for agricultural land remain strong. That's thanks, in part, to higher crop prices.

"The value of farmland is just like any other asset," said David Reinbott, agriculture business specialist at Scott County's University of Missouri Extension Office. "If the incomes are going up for the crops, of course it's going to push the farmland value up."

Progressive Farm Credit Services, located in Sikeston, does a benchmark study each year, where it reappraises the value of farmland to indicate the trends, said Don Jones, chief appraiser.

"They were increasing about 6.5 percent a year back in 2004, and it's moved up now," Jones said. The study from 2007 showed a double in the values over three years, with the increase coming in at about 14 percent.

Michael Bollinger of Bollinger Real Estate Services in Sikeston agreed, saying the prices for farmland, generally, have risen between 20 and 25 percent in the past few years.

"I'd say certainly the land prices have increased, particularly over the past three years, primarily because of more of the crop land being converted to corn production, and the higher corn prices have pulled other commodity prices up," he said. "Overall, you've got a substantial increase in commodity prices, which have thus created a substantial increase in land prices."

Bollinger and his staff do real estate appraisals and are brokers. Although the price of land in the area varies due to several circumstances, he was able to provide some ballpark figures to illustrate the change in values over the years. Good quality graded and irrigated land now sells for about $3,000 to $4,000 an acre, but would have had a price tag of about $2,000 to $2,500 three to four years ago, said Bollinger.

The higher values give the farmers a higher net worth, but don't really mean added dollars to their pockets in terms of value unless the land is sold, pointed out Reinbott. And even extra dollars at the grain elevator don't have as big of an impact as some may think, since the cost of inputs, such as fuel, chemicals and feed are also on the rise.

The rise in value is encouraging some landowners to sell and get the high dollar amounts, while others are holding on to the land. "He says, 'Yeah, I'm getting more per bushel, but the price of everything else keeps going up,'" Reinbott said.

"It seems like there is definitely more interest in moving land," said Reinbott. "A lot of people have been thinking about (selling their land) for awhile, and think this is the time to do it."

For instance, he continued, there are a lot of people who are two or three generations away from farming. Since they don't have a tie to the farm, said Reinbott, those landowners see the bottom line and are more willing to sell now.

Bollinger, on the other hand, said he hasn't seen a rush to sell land. In fact, he's seen the opposite.

"We seem to have fewer farmland sales this last year than in previous years," he said. "You have essentially more people interested in holding on to the land."

For those who rent out land, general cash rent prices have gone up over the past years, too, he and Reinbott agreed.

Reinbott said, however, that the increases will eventually stop. "I'm sure it will come back down or stabilize at some point -- but the question is when," he said. That leaves those who rent reluctant to lock in a long-term contract for a higher rate, he said.

The Associated Press contributed to this report.