1. It is widely believed that there is a "bubble" in the price of farmland right now similar to the housing market a few years back. I find that interesting, and I hope it is true. And I hope a lot of corporations lose their shirts in it and get out of the farming business when the bubble pops.
2. The cost of land goes down as you get further from a populated area (duh... no surprise there right?) but -and here is the fact that surprised me and has me scratching my head- it mostly doesn't matter what size the city is that you go out from.
Here is a tidy graph to explain it:
There is a big difference between 5,000 and 500,000 people! but apparently when it comes to farmland a city is a city is a city. Hogwash. There are lots of things I can think of that it is nice to be near a metro area for (all else being equal). 50 miles from the Minneapolis and St. Paul metro area is the boonies. But I could drive 50 miles once in a while to do the 1,000 different things that are only in a metro area. This is why I am surprised by these numbers. I would have though that a farm 50 minutes away from a big city is more valuable than one which is 90 minutes. But it ain't.
Very interesting! I've also read much about the rural land price bubble bursting but haven't seen it happening. I used to subscribe to the Stockman Grass Farmer in part just to read Allan (Nation's) Observations where he would talk about land prices.
ReplyDeleteInteresting David, thanks for sharing. BTW, this is off-topic but I really like the quote at the top of your blog. Spot on (not surprising from GK).
ReplyDeleteThanks O.F.
ReplyDeleteThe quote is from his book the Catholic Church and Conversion. There are lots of good lines in there about how "rebelious" it has always seemed to parents when their children convert to Catholicism, but not so much to become a Calvinist, Methodist, or what have you.
Devin,
ReplyDeleteIt looks like the rural bubble is lagging the housing bubble by a few years. I hope when it pops the timing is right for our families.
I would have to say that these numbers might not be that accurate anymore. Farmland values have changed significantly since about '09. They are really high both near and far from cities, large or not. Doug feels they will level out at HIGH no matter where the land is. The 'farther away' land is recently coming up in $ to join the prices of the metro area farmland prices in the past few years. This trend will likely continue. There are a number of reasons for this. The people that are buying alot of farmland right now are paying CASH for it. (Banks are VERY reluctant to loan for agriculture anything at this point so cash takes the sale, so to speak.)The federal govt has been paying the largest ever welfare subsidies to GRAIN farmers at a time when they have been making the highest ever profits for their grain. This leaves them able to buy lots of LAND with their profits. 40% of the corn crop in the US goes to ethanol production, 35% to livestock production, and the rest goes to export and US human consumption in that order. The EPA just mandated an increase in the blend rate of ethanol from 10% to 15% which over the next few years will increase demand for corn considerably.
ReplyDeleteThe USDA is telling farmers that we need to double production of food by 2050. The GRAIN farmers that are in the CASH will be happy to oblige by owning the land and following marching orders to their financial benefit! American agriculture has changed significantly since 2000. We are now a much more global player and our prices and the decisions we make are now based on what is happening in the world and world markets. (Even us small farmers!)
Agricultural products are one of the few commodities that the US has to sell to reduce the trade deficit. Ag land becomes something used to produce a sale-able item on the world markets. China has become a huge buyer of US grains. The gov. is saying that we could run out of grain before the end of the summer. This has happened before (1996 and 2011)...not pretty, yet we continue to export grain to China. China is worried about feeding its massive population. (China has 3 trillion $ of cash reserves. According to The Economist this is enough to purchase all of the farmland and total farming assets in the US and still have $ to buy all of the buildings and land in Manhattan and Washington DC...
Freaky!?!!!) The recent 'Arab Spring' was sprung from food shortages and the inflation of food prices. China could follow suite which makes their government worried.
One thing to remember, the difference between houses and food is that no matter how bad the economy gets, people have to eat. As we saw during our US economic contraction of '07 to '09, emerging countries are growing economically and their demand for food is increasing.(think India, China, Indonesia, Russia)The demand for what the land can produce is sought after by people besides just our US citizens. Just because things are bad economically here at home does not mean that our land values have to follow that. The whole world is a player now and they are contributing to our farmland price increases. side note: China is now purchasing dairy farms in NZ.
ReplyDeleteKeep your dreams alive. Everyone said I could not do this. Land in the city might actually be a good option for farming of a different sort, so keep your eyes open for value there as well as out of town. The Hmong's are a good example of how to farm at home and make some $. They sell veggies and flowers in all the small towns around here at curb side locations. There is also a roving oriental fast food joint that sells in the small towns here. YUM!
It is a good idea to teach the kids while they are really young to do HARD(FUN!)work so that they want to be involved later.
Thanks for re-inspiring us to do what we originally intended to do! No herbicides this year, YEA!, and the boys are building a chicken tractor for about two hundred birds. We hope to raise 400 eventually from the manure (corn waste) from the dairy cows. Other berry ideas in the works, too.
Saw your farm on mom's phone photos. COOL!!! It looks great. You will eat well. You could try vertical potatoes to sell to the neighbors. This would work well in the space you have.
We have really enjoyed Stockman Grassfarmer and Small Farmers Journal in years past (think CA) I am hoping to send 'Ten Acres Enough' to you, a good book from the 18oo's that is really applicable now. Thanks for the Joel S. books, We're reading them.
See ya down the road!
Doug and Melissa
"No herbicides this year, YEA!,"
ReplyDelete!! awsome!! Dont let Big Brother change you. Beter to get out there in a weedy field with an old grim reaper style sythe to get a couple good ears of corn than to try to play the million acre game with the rest of the corporate stooges that have sold their soul.
"and the boys are building a chicken tractor for about two hundred birds. We hope to raise 400 eventually from the manure (corn waste) from the dairy cows. Other berry ideas in the works, too."
Totally RAD. I am so jealous. You guys have so much potential there just waiting to explode. Next you need to try Salatin's pigerator system! There are some good videos of it on youtube.
Glad you are reading the books. It must be nice to read a chapter and then look out the window and say "hmmm, yeah I can do that."
I would love to read that book.
I will have to post some more pics too. It is amazing what one can do in about 80 square feet! Not sure what % of an acre that is but it goes to show space isnt everything.
I am planning on coming next weekend, and I will bring some seeds for you guys to look through. Also I can bring a few plants. I have some black cherry tomatoes that you will like I think.
Peace,
David