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Farmland values called ‘barometer’ for industry’s well-being

WASHINGTON—Farm real estate accounted for 84 percent of the total value of U.S. farm assets in 2009, according to a U.S. Department of Agriculture report released earlier this year. And strong farm earnings might have helped farmland real estate markets withstand the downturn in the residential housing market.

That’s according to the USDA Economic Research Service’s Trends in U.S. Farmland Values and Ownership, released in February. The report calls changes in farmland values “a critical barometer of farm sector performance and the financial well-being of agriculture.”

Land frequently is the largest single investment among a farm’s assets and a principal source of collateral when farmers seek business loans. Many farm operators also rely on landholdings as a retirement fund.

About 40 percent of the United States’ land base was occupied by farms in 2007, the most recent year for which that data is available. Most farmland is in the Midwest, but it exists in all 50 states.

U.S. farmland values rose throughout much of the post-World War II period, ERS reported, and increased 92 percent between 1969 and 1981. After that they began to drop in response to rising interest rates and high energy prices. In 2005 and 2006, they increased 16 percent and 10 percent, respectively. Growth in values has slowed since then but continues to increase by 3 percent to 5 percent annually.

ERS found that the average per-acre value of farmland in Virginia was $4,600 in 2010. In the agency’s Appalachian Region, which includes Virginia, 28 percent of farmland was found to be owned by persons other than the farm operators.

Nationwide, less than 2 percent of privately owned farm and forest land was found to be foreign-owned; most of that is forestland in Maine, and the majority of foreign owners are individuals or businesses in Canada (34 percent) and the Netherlands (17 percent).

Farm earnings in a given year and soil quality are two factors that can drive farmland values. Other factors are less farm-related; farmland near urban centers can generate returns with its residential and commercial development potential. Additional drivers include scenic views, desirable climates and other factors that attract people to rural areas.

The full ERS report is available online.

Contact Pam Wiley, VFBF communications, at 804-290-1128. 

Posted in: Miscellaneous

 

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