# Land is the hottest commodity on the farm



## Bob Kellam (Apr 8, 2004)

Land is the hottest commodity on the farm

By JAMES MacPHERSON, Associated Press

Rick Rohrich takes a break from feeding cattle at his new farm in Steele on Thursday. Rohrich, a 26-year-old father of three, bought the farm last week at a time when crop and pasture land was fetching record prices.

STEELE (AP) - Rick Rohrich, a 26-year-old father of three, bought his first farmstead at a time when crop and pasture land was fetching record prices. He didn't think he had a choice.

Rural land prices are setting records and farmers, with a boost from high commodity prices, are in a buying mood.

''The prices keep jacking up and I don't see it slowing down,'' Rohrich said.

*He closed on the 320-acre property last week, paying about $1,000 an acre for pasture land, a farmhouse and some outbuildings.* The cost of the property was about double what it was worth less than five years ago, he said.

''Land prices are getting to where it will push us young guys out,'' he said.

Rohrich, who was born and raised in the central North Dakota town of Steele, said he's been farming nearly full-time since he was 16.

''My dad still farms - everything I got I got on my own,'' said Rohrich, who estimated he's about $500,000 in debt for the farm land and machinery. He's paying bills by raising cattle, and growing wheat, corn, sunflower, barley and oats on several hundred rented acres.

''I figured it was time to start buying into my own land - in this business you got to have it,'' Rohrich said. ''I think it's a good investment, because they don't make land anymore.''

Ray Brownfield, president of the Society of Professional Farm Managers and Rural Appraisers in Oswego, Ill., said rural real estate values around the country have soared to record prices, and they continue to rise.

''Farmers are back in the market - but the issue is supply and demand. There are many more buyers than there are sellers,'' Brownfield said. ''I don't see a preponderance of ground coming on the market.''

High commodity prices, while giving farmers a healthy bottom line, also have driven up the value of land - so much so that agriculture officials say the land itself has become the hottest commodity in North Dakota and other farm states.

In the past, so-called 1031 tax exchanges - named for the federal tax code section that allows them - led out-of-staters to buy land in North Dakota, but that practice has slowed with the most recent spike in farm land prices, experts say. The tax exchanges allow sellers to avoid paying capital gains taxes on land sales if they buy another property within a certain timeframe, appraisers and agriculture officials said.

Now, it's farmers selling to farmers, oftentimes to their neighbors.

''Since July, it been a farmer-driven market,'' said Steve Tomac, a real estate appraiser with Farm Credit Services in Mandan.

''Traditionally, farmers always have reinvested profits back into their land,'' Tomac said. And 2007 was a ''magic year'' that is spilling over into 2008, he said.

''Gross revenue in 2007 from production on land purchased in 2006 could have probably paid for that land,'' he said.

Farm real estate values nationwide rose 14 percent from Jan. 1, 2006, to Jan 1. 2007, to a record average of $2,160 an acre, according to the U.S. Department of Agriculture.

USDA spokesman Scott Shimmin said the report on 2007 farm real estate prices won't be finished until this summer, though it appears last year will set another record.

Low interest rates, government farm programs and reinvestments to avoid taxes on capital gains are among the factors contributing to the record farm land prices, but record commodity prices are the main reason, he said.

''Commodity prices have remained very strong, if not excellent - you would expect that to drive up real estate prices,'' Shimmin said. ''If you look at the past 25 to 30 years, (farm land) has not been a very risky investment. Over the long term, it has had a pretty solid return.''

Steve Tomac's father, retired Sioux County farmer Bob Tomac, said the situation reminds him of his first year farming 60 years ago, when he and others were able to pay for newly acquired land from profits reaped from crop production in the same year.

''We had a good flax crop in '48,'' Tomac said. ''We got $5.65 a bushel - that was a lot of money in '48 when land at that time was $25 an acre at the most.

''That was quite a year, and I suppose it revived itself last year,'' Tomac said. ''For farmers, it's been long overdue.''

USDA said the value of North Dakota farm land rose to an average of $650 per acre at the end of 2006, up 13 percent from 2005.

Ken Knudson, a senior vice president at Farm Credit Services in Fargo, said some prime North Dakota farmland has increased more than 40 percent in the past year, but most has been in the 15 percent range.

A land sale in Walsh County, in northeastern North Dakota, recently fetched more than $4,300 an acre, likely a record for the state, he said.

''Every ridiculous land price the year before has become this year's bargain,'' Knudson said.


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## fargojohnson (Oct 17, 2005)

I know I have been buying want I can.


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## Sasha and Abby (May 11, 2004)

It is a cycle that is quickly coming to an end. The record land prices are topping out and will continue to drop again, over the next decade, just like they have in all the previous cycles. I wish they wouldn't but every thrown rock eventually comes back down.


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## USSapper (Sep 26, 2005)

Sasha and Abby said:


> It is a cycle that is quickly coming to an end. The record land prices are topping out and will continue to drop again, over the next decade, just like they have in all the previous cycles. I wish they wouldn't but every thrown rock eventually comes back down.


Im afraid this one never will come down


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## dblkluk (Oct 3, 2002)

> that was a lot of money in '48 when land at that time was $25 an acre at the most.


Sasha..
If your theory holds true, when will the rock come back down to $25/ acre?? :lol:



> It is a cycle that is quickly coming to an end. The record land prices are topping out and will continue to drop again, over the next decade, just like they have in all the previous cycles.


With commodity prices the way they are right now, land prices will not be dropping anytime soon.


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## dakotashooter2 (Oct 31, 2003)

A local farmer here in the northern Red River Valley just bought on bids, 3 quarters of prime farmland at ............................................................ *$5,600 per acre*. Just about 2.7 million. And they wonder why there are not any "family farms" anymore.


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## angus 1 (Jan 14, 2007)

$10 wheat and $19 durum are going to hurt more farmers than it will help. I have never seen so many new pickups in my town. Not a one of them remembers 2 years ago when the prices were low and not a one realizes that those prices will return. At this point in time most of the farmers I know are adding onto the house , new vehicles , more land at a high price , new equipment and vacationing. They are spending more and not paying off things and getting out of debt. Some of that debt has been refinanced many times. Land will go sharply down in the near future. They are all budgeting on these high prices and these high prices won't last forever. I for one will not feel sorry for any of them.


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## USSapper (Sep 26, 2005)

So when do you guys see these prices going down? Look at history and they have done nothing but go up


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## blhunter3 (May 5, 2007)

Just wait then prices will come down hard. Just one bad year for crops, will have alot of those farmers who are buying everything will lose everything. It may happen in a year it may happen in 20 years, I don't know. But I do know from talking to farmers, weighmasters, and economies teachers about this for the last 2 years now. They all have said that the prices will come crashing down.

Also this $10 wheat, $5 corn, cannot hold out, other countries will have their prices lower. I cannot rememeber where I heard this but there is a wheat harvest every 6 weeks somewhere in the world. Watch that $10 wheat drop sometime, along with the corn after people stop using corn products because of the high prices.

And with farmers unable to pay the rent the land prices will go down. Unless those [email protected] pay to play hunters buy up evrything.


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## hunter9494 (Jan 21, 2007)

unfortunately, corn syrup is used in almost everything, from ketchup to candy. the demand for food and energy will continue to accelerate.
nothing will come down, with global warming and more crop failures around the globe, anything that was considered cheap before, will no longer be so.


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## walker (Sep 27, 2007)

Farm land prices will flucuate some what but the general trend will be up, up, up. Farm land is not like housing. They crank out housing like chinese toys. Also, the world food supply will get nothing but tighter as the decades go on.

Me, I'm the no debt type. I spell freedom "NO DEBT".


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## dakotashooter2 (Oct 31, 2003)

A drop in prices is not the only thing that can hurt farmers. A few years drought will have the same effect. And that time IS coming. Prices may remain high but if you only get 1/2 the harvest that doesn't mean much.


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## walker (Sep 27, 2007)

Good point about the weather. Weather and economic factors can all cuase drops in land prices.


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## blhunter3 (May 5, 2007)

But will those pay-to-play people still have the money to keep the prices high?


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