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Encroachment
by developers building high-cost houses, apartment units and condos have
a lot to do with the decrease in farmland.
The
ups and downs of farmland value and other factors have been closely
monitored by two Auburn University (AU) professors who have pinpointed
factors for the huge drop in farmland usage and a big jump in farmland
values.
Some
are easy to understand, especially for farmers who remember the sharp
drop in values during the early 1980s. That’s when interest rates
topped 20 percent and wiped out many farmers, particularly those who
grew soybeans.
Farmland
values have risen and fallen during the past 30 years, but recent
studies have shown a sharp upward trend. That’s understandably good
news for those who till the soil.
According
to Auburn agricultural economics professors John Adrian and Walt Prevatt,
the value of farmland in Alabama has jumped by double digits for three
years in a row.
Their
seven-page report, issued a few months ago, said the current value of
$3,100-an-acre in Alabama has resulted from a combination of factors.
"Favorable
interest rates, a popular tax incentive and outside demand for land by
non-farm investors all have contributed to the high values for farm real
estate in the state, particularly over the last three years," said
Adrian.
During
an interview with the Cooperative Farming News, the AU professors
explained their extensive analysis of Alabama farmland returns and
values from 1970 to the present.
Using
figures by the U.S. Department of Agriculture, the two professors
examined farmland values during individual decades since 1970. They also
studied farm real estate values during the current decade of the 21st
century.
Adrian
and Prevatt determined farmland values increased an average of 14.2
percent a year during the 1970-81 decade which was considered the
"boom years."
Values
dropped more than seven percent a year during the down decade of the
80s, improved during the 90s and have risen sharply this decade,
especially during the past three years.
The
two men said when they conducted their study, they had no intention of
trying to "prove a point."
"We
didn’t want to make any broad sweeping statements about what our food
policy should be," said Prevatt. "We’re just trying to say
something about what’s been happening to our land values and cash rent
situation."
He
said farmers around the state have been contacting him and Adrian about
their report, wanting to learn more about it and discussing their
personal stories with them.
"Most
of the farmers who call us feel good about their investment in land and
how good their balance sheets look," said Prevatt. "Some also
complain ‘I’m worth a lot of money, but I make a poor living on this
high dollar land.’"
Adrian
said land values have made many Alabama farmers "very
wealthy," but that’s on paper, not in the bank.
"Their
cash flow is poor," he said. "Only a few of them make a lot of
money by selling their land. There’s just something about farmland
that makes it tough to sell. They don’t want to give up their
land."
An
AU article about the study conducted by Adrian and Prevatt said outside
interest in farmland had a lot to do with the double-digit value
increase.
Adrian
said outside investors desiring farmland and those using the federal
"1031" exchange tax provision were key elements of the
increase in farm property values.
The
federal provision allows people who sell their farm property to defer
payment of capital gains taxes by sinking their "windfall"
profits in similar property investments somewhere else.
Adrian
and Prevatt said the federal law has affected prices "as farmers
have sold high-value land near urban areas and subsequently bought
farmland in more rural, lower-cost areas and states."
Both
men grew up on farms — Prevatt in Florida and Adrian in Alabama — so
they are no strangers to the vagaries of agriculture.
Both
have agricultural doctorates and are approaching senior citizen status,
but memories keep them close to the soil they prepared for planting as
young men.
"I
grew up on a family-owned diversified farm," said Prevatt. "I
gained much knowledge and discipline from my involvement with these
agricultural enterprises."
In
addition to getting his hands dirty during planting and picking seasons,
Prevatt said he also "benefited greatly from the management and
operational responsibilities I experienced while serving as a partner of
the family farm."
The
farm where Adrian lived in Cherokee County was similar to most around
Alabama and it offered him hands-on experience just like Prevatt.
"Our
farm was pretty much the same as most in Alabama — about 200 acres or
so with a little Ford tractor to help with the heavy work," he
said. "We were self-sustaining. So were all the other farmers back
then."
Adrian
said the landscape in Cherokee County has changed drastically in the
past half century, just as it has in Alabama’s 66 other counties.
"All
you’ve got to do is drive through Cherokee County today and see all
the $250,000 houses," he said. "A lot of them were built on
what used to be farms. That’s a lot of high dollar land and that’s
why many farmers finally decide to sell."
Times
have changed and so has food production in the U.S. In the "old
days," nearly all food items in America were grown within its
borders. That’s not the case today. Importation of foreign-grown food
continues to increase.
"Hopefully,
we won’t make the same mistakes in food production in this country as
we did with our energy situation in the 70s," said Prevatt.
"We don’t want to be held hostage to high food prices as well as
fuel."
Prevatt
believes as long as the American consumer is satisfied with their food
supplies, they won’t raise much of a fuss unless prices get out of
hand and supplies are reduced.
"We’re
importing more than ever," he said. "As long as there is cheap
food in this country I don’t think anybody’s going to be too
concerned about it."
Although
the availability of farmland has shrunk more than 50 percent in Alabama
in the past 60 years, the production from what’s left leave the two
Auburn professors amazed.
"This
is a heck of a success story," said Prevatt. "Here we are,
producing on less than half of what we had been using and the food you’re
eating today is cheaper than it’s ever been."
Adrian
couldn’t agree more and points to statistics showing the
"average" Alabamian consumes about 2,000 pounds of food a
year. Of that, more than 260 pounds come from foreign sources. That’s
about ten percent and could go higher if current trends continue.
Modern
technology has a lot to do with maintaining and often exceeding food
supplies, said Adrian. Picking cotton by hand went out with the Edsel
and production hasn’t skipped a beat.
One
reason for the drop in farmland usage is the decision by many farmers to
convert crop and pasture property into forests. Pine trees may take
awhile to grow, but can provide favorable returns for the owner.
What
concerns Adrian and Prevatt is the drop in rental revenue for farmers.
They said the average price today is $19.50 an acre.
"Nobody
really sets a price because rental and purchase prices are what the
landowner and renter is willing to charge and pay," Prevatt said.
"What’s nice to see is that seven percent increase in real value
of farmland over the past 20 years."
The
"supply and demand" theory appears to be more relevant than
ever when Alabama agriculture is concerned.
The
demand for land is gobbling up pastures and row crop property across the
state, but the supply of food from what’s left hasn’t diminished —
it’s risen.
It
may seem to be an agricultural anomaly, but it’s also become a fact of
life in the 21st century in Alabama.
Alvin
Benn is a freelance writer from Selma. |
