USDA on Land Values, and Super Committee’s Affect on Beginning Farmers
As a reader recently pointed out, I actually mean “effect”, not “affect”. Grammar has never been my strong point. But the nature of the web means there’s no going back.
This Month the USDA Released a New Report on Land Values. According to the new 22 page publication “The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,350 per acre for 2011, up 6.8 percent from 2010. Regional changes in the average value of farm real estate ranged from a 15.9 percent increase in the Corn Belt region to a 2 percent decline in the Southeast region…” Rising land values will clearly have a dramatic impact on aspiring and beginning farmers looking to buy new farms, rent farmland, or expand their operations. While rising prices may benefit farmers who currently own land, some of whom are beginning farmers, the brunt of rising prices is sure to be felt by those looking to begin or expand new farm enterprises.
The report also shows that “The highest farm real estate values [are] in the Northeast region at $4,690 per acre. The Mountain region had the lowest farm real estate value, $923 per acre”. In addition, “The United States cropland value increased by $260 per acre (9.4 percent) to $3,030 per acre. In the Northern Plains and Corn Belt regions, the average cropland value increased 17.2 and 16 percent, respectively, from the previous year”. While in the Northeast and Southwest “…cropland values decreased by 1.3 percent and 1.1 percent, respectively. Finally, “The United States pasture value increased to $1,100 per acre or 1.9 percent above 2010. The Southeast region had the largest percentage decrease in pasture value, 8.4 percent below 2010. The Corn Belt and Northern Plains regions had the highest percentage increase, both 6.6 percent above 2010.
While the 22 Page report highlights the current situation, it is unclear whether farmland values will continue to increase. As Chris Clayton of DTN Progressive Farmer reports, the new Congressional “Super Committee”, a bipartisan group of 3 Senators from each party and 3 Congressmen from each party, chosen by party leaders in each body and charged with forming recommendations to reduce the U.S. deficit, will undoubtedly be making cuts to federal agriculture spending. According to Clayton ” ethanol tax support is likely gone, while direct payments are on the chopping block as the process to cut spending may accelerate decisions on the next farm bill”. Cuts to ethanol subsidies and direct payments would very likely have the effect of decreasing farmland values, and are virtually assured to do so as long as crop prices don’t increase in proportion to these cuts. Ethanol subsidy cuts in particular are likely to decrease crop prices by encouraging more farmers to sell commodity crops into the food market thereby increasing supply, reducing demand and, if traditional economic logic holds, thereby reducing price. In addition, expected cuts to conservation programs will likely put more land into production, further increasing supply.
Farm program cuts may be a mixed bag for beginning farmers, and will depend greatly on where they are made, and how they are implemented. Conservation program set-asides for beginning farmers, especially within the EQIP program have been widely used, and beginning farmer loan program money is often insufficient to meet demand as it is. The bottom line is though cuts to some programs may make land more affordable, the ability of beginning farmers to find the capital with which to acquire it through government programs may also be in jeopardy. There are too many contingencies and relationships between different agriculture programs for even those of us who follow agriculture policy closely to say for certain what the impact of agriculture program cuts will mean for beginning farmers. Adoption of the provisions in the Beginning Farmer Marker Bill expected to be introduced later this year by Senator Harkin, and Congressman Walz would vastly improve the situation for beginning and aspiring farmers seeking to take advantage of federal programs. But expected across the board cuts to agricultural programs, expected from the Super Committee may make passage of these provisions challenging. Because the Super Committee is not allowed to touch the 64% of farm bill money allocated to food security programs such as food stamps and WIC, it is inevitable that agricultural programs will face significant cuts. Modest drops in land prices may not be sufficient to offset the money that is lost from beginning farmer programs. At the moment it anyone’s guess how deep the cuts will be, and which programs will take the brunt of them. There has been talk about combining a number of conservation programs to save money on implementation and allocation, but right now the overall outcome is unclear.
I would urge all beginning farmers and their supporters to contact their representatives, especially those on the House and Senate Agriculture Committees whom you can find through the Committee websites (HOUSE: https://agriculture.house.gov/; SENATE: https://ag.senate.gov/site/index.html and urge them to both protect current beginning farmer programs and set-asides, and ask them to contact Senator Harkin and Congressman Walz, and consider becoming co-signers on their Beginning Farmer Marker Bill. I would also encourage those of you who have Congressional Representatives on the Super Committee (HOUSE: Fred Upton (R-MI) Dave Camp (R-MI) Jeb Hensarling (R-TX) — Jim Clyburn (D-SC) Chris Van Hollen (D-MD) Xavier Becerra (D-CA); SENATE Jon Kyl (R-AZ) Rob Portman (R-OH) Pat Toomey (R-PA) — Max Baucus (D-MT) John Kerry (D-MA) Patty Murray (D-WA) and urge them to protect beginning farmer programs.
We will see how this all pans out, and I will try to keep everyone updated. But we are going to have a fight on our hands, and your support can mean a great deal. So make a phone call, send an e-mail, write a letter, and please fight to support beginning farmer programs as we go through this process. I know this is all very confusing, but please contact me through the About/Contact page, and I will do my best to answer any questions you may have.
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I thiink you mean effect.
Yeah. I realized that after I posted it. And once a permalink goes out people connect to it, so changing the title isn’t an option. I’ll just have to live with my grammatical error (though I did add a preface to the post acknowledging it).
Interesting that farm land has gone up in price whereas city land and home prices have dropped. Perhaps nature should reclaim all that city land?
Thanks MIl, I can always count on you for insightful comment. I think the two are related. In fact a lot of Wall Street type investors have started putting farmland into their portfolios. They’re looking for a quick buck, as usual. And they will know when to get out (as usual). But If I wasn’t a grad student with debt, I’d still be buying farmland and commodities if I wanted to be “that guy”. I’ll tell you when it’s going to break, because I talk to the people who break it regularly (politicians and nonprofits who write the laws). This conversation will continue, and it will be interesting to see what happens. My real hope is that it’s not farmers that get screwed (as usual). Do some research. Send me a guest post. Please. You underestimate your own capacity to understand and interpret these things. You are the most ‘connected’ person I ‘know’.