Up, up and away: High commodity prices drive increases in farmland values, rents
Photo 
Playing with his daughter Brooklyn outside has become a less frequent occurence for stay-at-home dad Ross Raymond of Janesville, ever since his 3-week-old son was born, but Brooklyn relishes in the moments.
JANESVILLE — Farmers in Rock County are facing the highest land prices in decades, and the trend is continuing into 2012.
The Federal Reserve Bank of Chicago reported earlier this year that Wisconsin farmland values rose 18 percent in 2011, mostly driven by demand for acreage to grow corn and soybeans.
In the five-state region that includes Wisconsin, prices were up 22 percent, the biggest increase since 1976.
"The year 2011 may go down in the annals of U.S. agriculture as a once-in-a-generation phenomenon," the bank said in its February "Ag Letter."
In Rock County, land prices in 2011 were up 23 percent, according to a Gazette review of real estate data provided by the Wisconsin Department of Revenue.
Last year, 4,125 acres of Rock County farmland sold for an average price of $6,209 per acre.
David Oppedahl, a business economist for the Chicago Fed, said significant increases in ag prices have hiked farmland values.
Across the district in 2011, corn prices were up 57 percent, soybean prices increased 26 percent and wheat prices jumped 45 percent.
The price increases stretched into the livestock and dairy markets, he said, noting that milk, hog and beef cattle prices were up 23 percent, 21 percent and 21 percent, respectively.
"Commodity prices have been good, and the demand has been strong," said Jim Stute, UW Extension crops and soils agent for Rock County. "We had a fundamental change in commodity markets in about 2008, and prices have generally doubled.
"That's increased land values and rental rates."
In years' past, urban sprawl fueled increases in farmland prices, but the recent recession and downturns in the housing market have all but eliminated that as a reason for the surging values.
Some high-priced sales inflated the county's overall average.
One in Johnstown Township involved 76 acres at an average price per acre of $12,200.
Four other sales topped the $10,000-per-acre mark, including the sale of 160 acres in Bradford Township that is now the home of Rock Prairie Dairy, which will become the largest dairy operation in the county.
Rent rather than own
Farmers that rent the land they work have not been immune to the price increases.
The rent the pay increased significantly in recent years.
Stute said the state listed the cost to rent an acre of Rock County farmland in 2011 at $149, which is an average that includes good and poor soils.
Farmers, he's heard, are paying much more than that—in some cases double.
"Rental rates are the best kept secret in Rock County," Stute said. "I've approached my best cooperators and asked them that if I did a survey on rental rates, would they answer it and would they answer it honestly?
"The answer to both was no."
More players
As land prices increase and commodity prices rise, traditional farmers aren't the only ones opening their checkbooks.
Outside investors are buying local land that they can rent at the higher prices to local farmers.
"The land rents are increasing for the same reasons that sales prices are going up: commodity prices are attractive," said Matt Larse, a loan officer at Badgerland Financial in Janesville.
"We are financing people from all over the United States on land in Rock County. Commodity prices are strong, and the stock market is unstable, and outside investors look at it is a solid investment."
Larse said many investors make a down payment of 50 percent on the land and then charge $200 or $300 per acre on a rental contract.
"That pays the mortgage, and they still have the land as an asset," he said.
Most local land sales, he said, are not to small operations looking to add another 40 or 60 acres. Instead, the sales are either to investors or to full production farmers who want a minimum of 120 acres to expand their operation as efficiently as possible.
In its May "Ag Letter," the Chicago Fed noted that farmers are buying more of the land in the district than outside investors.
Stute said he believes that trend holds in Rock County, as well.
Will it continue?
Commodity prices are still strong, but they may be leveling off or even slipping, Stute said, adding that costs for fertilizer, seed and fuel have continued to increase.
That's cut profit margins.
"Costs are up dramatically," Stute said. "It's a high-cost year, and if commodity prices fall, we could have all sorts of problems."
The soaring land values have been noticed in the ag lending community. Some lenders fear the bubble could burst—as it did in the 1980s—if farmers struggle with lower commodity prices, rising costs and too much debt.
Larse said land values are strong and increasing.
Whether it will continue, he said, is the $1 million question.
"Some economists say it will stabilize and growth will slow; others say that's not the case," he said.
So far in 2012
Oppedahl said agricultural land values continued their rapid rise at the start of this year.
Across the five-state district, values were up 19 percent, including a 13 percent increase in Wisconsin.
County-level sales, however, are yet to be certified.
"Already in 2012, Rock County has had three or four sales with averages above $12,000 per acre," Larse said.
One of those sales involved the city of Janesville's purchase of 84 acres in Rock Township for $18,000 per acre. Eventually, SHINE Medical Technologies will use a portion of the land for production of medical isotopes.
Larse said such sales tend to skew average prices higher, while family transactions for land sold below market value often lower average prices.
"It certainly works both ways," he said.
Looking forward, Oppedahl said the trend toward higher farmland values could be easing.
One-third of the banks surveyed by the Chicago Fed expect farmland values to increase through the second quarter, while two-thirds expect prices to stabilize.
Jul 13, 2012 at 11:46 p.m.
Suggest removal
When did "rents" become a noun?
Jun 22, 2012 at 10:55 a.m.
Suggest removal
mzat74 - google is your friend. "Farmers who grow fruits, vegetables and tree nuts, on the other hand, receive no regular direct subsidies" - http://www.washingtonpost.com/national/h...
Jun 22, 2012 at 9:33 a.m.
Suggest removal
mzat74 said: "The artificial sweeteners do contribute to the overall problem." Yes it certainly does. The reason more things have sweeteners in them is because of cheapness, compared to regular sugar.
-----
"Farmers don't manufacture the corn syrup, farmers grow the corn (much of which goes towards animal feed)." No they do not manufacture corn syrup, however America's obesity problem is not just for sweeteners. It's from an over consumption of animal meat, much of which is fatty, produced largely from animals raised on corporate farms and ranches. I don't blame farmers for wanting to get the most amount of money for their crops, but don't you think it would be beneficial to everyone if we actually raised more local produce, besides vast fields of corn and soybeans? However, that would take people acting responsibly, not eating processed foods, stop patronizing places like McDonald's, and buying produce from your local farmers, instead of having is shipped in on the back of tractor trailers from a thousand miles away.
Jun 22, 2012 at 9:18 a.m.
Suggest removal
Obesity is not solely caused by high fructose corn syrup. There are many causes to obesity, lack of activity, genetics, etc. The artificial sweeteners do contribute to the overall problem. However it is also up to the consumer to do the educated shopping as well. Farmers don't manufacture the corn syrup, farmers grow the corn (much of which goes towards animal feed).
Jun 22, 2012 at 9:14 a.m.
Suggest removal
taxed2much- Isn't most insurance a scam? Pay and pay until you need it and then... oops sorry, we won't cover that, we changed the terms etc etc.
Jun 22, 2012 at 9:08 a.m.
Suggest removal
I would guess that carrot and pea farmers get subsidies as well. I would also bet, if you drove around Rock county, there would be farmers who plant peas or other canning crops that are recieving/have recieved subsidies.
Jun 22, 2012 at 8:47 a.m.
Suggest removal
mzat74 - you want to subsidize farmers ? How about broccoli, or pea farmers ? Maybe carrot farmers. No, healthy food farmers don't get a dime in subsidies. Instead, it goes to the crop that gets processed into high fructose corn syrup, which makes us obese. Obesity and diabetes, now the #1 killer of adults and costing us $70 billion extra in healthcare. Doesn't make sense, does it ?
Jun 21, 2012 at 2:21 p.m.
Suggest removal
http://www.cnbc.com/id/47903496
Crop Insurance is even a bigger scam.....
Jun 21, 2012 at 7:50 a.m.
Suggest removal
O.K. over 15 years that looks like a lot of money. However, it works out to just over 100,000 per year. Input and management costs for a farm may far exceed this depending on the size of the farm.
The 100,000 may allow the farmer to also upgrade machinery or other items on the farm. It may also allow the farmer to keep people employed on the farm.
Jun 20, 2012 at 4:51 p.m.
Suggest removal
someone-
$40k was just a portion. Larson Acres Inc received subsidy payments totaling $1,766,882 from 1995 through 2010
-
http://farm.ewg.org/persondetail.php?cus...
- and you are wrong about the $17.5M.
Jun 20, 2012 at 9:58 a.m.
Suggest removal
Without subsidy programs there would be many American farmers that wouldn't be able to stay around, and then what are you going to complain about? High food prices because the products had to be imported? Support the farmers, they keep the food on your fork!
I really don't care about what these farmers are getting paid, the number one on the list for Rock Cty subsidies got 99K and there were only 6 Rock Cty farmers getting over 40K. Rock Cty has some of the best farmland in the state, and the small amount received from subsidies goes nowhere with the current input costs required to farm and produce food.
BTW, base price on the smallest model of a new JD combine is closer to 300K, and most of these big operations run 2 combines in order to get the crops out when they need to be harvested. And most of the big operations don't run the small combines, larger models go all the way up to 450K base price, not to mention the additional 100-125K for a header. I don't think most people even understand the expenses that our farmers have to incur to be successful.
I noticed Larson Acres is on the list of subsidy recipients for last year... I was on their website not too long ago and read that they spend $17.5 million in our local Rock Cty economy. But hey lets complain that they got 40K from the subsidy program!
Jun 20, 2012 at 7:48 a.m.
Suggest removal
Rents? Real good grammar from a newspaper. Rents is a verb not a noun
Jun 19, 2012 at 11:48 a.m.
Suggest removal
Less transparency?
Less accountability?
Defending subsidies to bankrupt solar companies?
More secret deals?
More dishonest business practices?
WOW! This is Obama's playbook exposed.
Jun 19, 2012 at 8:42 a.m.
Suggest removal
Less transparency?
Less accountability?
Defending welfare for farmers?
More secret deals?
More dishonest business practices?
Wow! This is the Republican playbook exposed.
Jun 18, 2012 at 2:57 p.m.
Suggest removal
mzat74 - over $5M in taxpayer subsidies just to Rock County crop farmers in one year ? Cumulatively, that's huge. And taxpayer subsidies is one reason combines now cost $200k.
-
Recipients of Subtotal, Farming Subsidies from farms in Rock County, Wisconsin totaled $5,537,000 in in 2010.
Rank Recipient
(* ownership information available) Location Subtotal, Farming Subsidies
2010
1 Sayre Farm Operations ∗ Edgerton, WI 53534 $98,865
2 Roger Rebout & Sons Farm ∗ Janesville, WI 53548 $87,565
3 Judith A Hughes Janesville, WI 53546 $80,000
4 Whilden R Hughes Janesville, WI 53546 $80,000
5 Riesterer Farms ∗ Milton, WI 53563 $79,831
6 Metcalf Farms Partnership II ∗ Janesville, WI 53546 $79,168
7 Farrington Farms ∗ Edgerton, WI 53534 $71,815
8 Gary W Hahn Beloit, WI 53511 $41,238
9 Michelle J Hahn Beloit, WI 53511 $41,238
10 Mitchell G Melms Orfordville, WI 53576 $40,000
11 Tracy & Son Farms Inc ∗ Janesville, WI 53546 $40,000
12 Arndt Farms Inc ∗ Janesville, WI 53546 $40,000
13 Fenrich Farms Inc ∗ Evansville, WI 53536 $40,000
14 Arnold Farms LLC ∗ Evansville, WI 53536 $40,000
15 Prairie M Farms LLC ∗ Janesville, WI 53546 $40,000
16 Larson Acres Inc ∗ Evansville, WI 53536 $39,835
17 Hull Farms Inc ∗ Edgerton, WI 53534 $39,249
18 Stuart L Shadel Jr Inc ∗ Milton, WI 53563 $37,442
19 Kenneth P Luety Clinton, WI 53525 $36,505
20 Marcia P Luety Clinton, WI 53525 $36,505
Jun 18, 2012 at 2:28 p.m.
Suggest removal
I also would not call them "huge" subsidies. Between $40,000 and $80,000 is not a lot when a new combine can cost $200,000 or more.
Jun 18, 2012 at 2:24 p.m.
Suggest removal
Why should it be a requirement for farmers to freely supply their rental rates. Most are privately held businesses, which have no obligation to divulge financials of any sort to the public.
Jun 18, 2012 at 1:43 p.m.
Suggest removal
To: CriticalEye
Great comment!
Jun 18, 2012 at 9:30 a.m.
Suggest removal
The part of this article where no one would tell the truth on land rental rates is the key.
Plus farmers in Rock Co. are receiving huge subsidies:
http://farm.ewg.org/top_recips.php?fips=...
5.5 million dollars in 2010.
Before you post a comment, consider this:
Note: GazetteXtra.com does not condone or review every comment. Read more in our User Policy AgreementPost Comment
Commenting requires registration.