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Land values continue to increase

A chance to conduct business on even a small piece of North Dakota's more than 39 million acres of farmland has not come cheap in recent years, as the price per acre continues to rise.

Kevin Pifer, a former North Dakota Deputy Commissioner of Agriculture who heads Pifer's Auction and Realty in Bowman, said land values have tripled over the last six years.

"Farmland values increased around 30 to 40 (percent) last year but leveled off in November," he said. "The market remains really strong and very confident."

North Dakota is made up of almost 90 percent farm and ranch land, which has gone up in price, on average, a little more than 57 percent from 2007 to 2012, according to the results of a land valuation model for an ag real estate assessment conducted last year by the North Dakota State University's Department of Agribusiness and Applied Economics in Fargo.

Between 2011 and 2012, the report indicates that farmland values in southwest North Dakota counties increased in value by an average of between 20 and 30 percent.

Most southwestern North Dakota counties experienced an increase of 40 to 60 percent in the value of farmland between 2007 and 2012, according to the report.

The lowest changes in prices for all agricultural land in North Dakota were seen in Billings and McKenzie counties in the southwest and Walsh County in the northeast, according to the report.

In comparison, the largest farmland value increases by more than 80 percent were seen in Burke, Divide and Renville counties in northwest North Dakota.

For Stark County, the average annual value of cropland last year was $394 per acre, according to the study. That compared to $114 per acre for non-cropland and $290 per acre for all agricultural land in the county in 2012.

Bowman County cropland averaged $337 per acre, Hettinger County averaged $468 per acre and Adams County averaged $318 per acre.

John Blanchfield, senior vice president of the American Bankers Association Center for Agricultural and Rural Banking, said he does not see anything on the horizon that would cause a severe drop in land values.

But if prices were to decrease at some point, he said there would be an impact.

"First, farmers would feel less wealthy. As a result they may cut back on purchases and this would impact much of the ag economy," he said. "Second, their borrowing base would be reduced, so they would be able to borrow less if they needed to. This is because bankers lend only a percentage of the market value of the land. But, again, I do not see an event or events on the horizon that would cause a severe drop in land values."

Ronald Haugen, a North Dakota State University Extension Service farm management specialist, said the price of farmland is on the rise across the nation and property in North Dakota has been no exception.

"It appears that farmland prices will remain strong, unless there is a downturn in the commodity prices or the economy," he said. "That has already started to impact young farmers, who might not have the capital they need to allow them to purchase the land."

North Dakota Agriculture Commissioner Doug Goehring told The Dickinson Press last year that access to affordable farmland remains a barrier for first-time producers who want to get into the business.

"This is a very capital-intensive industry with margins that are very hard to service because of the increased cost of doing business, purchasing equipment, livestock, land," he said. "Sometimes this is overwhelming to new farmers because they only have so much money to work with."

But it appears, Haugen said, anyone looking to purchase land better get used to it, as long as farmland continues to be seen as a good investment by speculators.

"Farmers have had a good past few years and speculators are looking for good, hard investments, like farmland, and that is

helping to drive up the prices," he said.