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Farmland Holds Value
 Farmland Holds Value

Originally Appeared On:"delmarvanow.com"

By Brian Shane
Apr. 10, 2012

Everyone knows that residential and property taxes are plummeting, sending state and local budgets into a revenue tailspin. But what about farmland?

One local farmer said the property tax bills for his 115-acre home farm are up by about $1,000, or 12 percent, in the last round of triennial assessments.

"Farmland, trees, anything to do with ag land basically went up. I saw an increase in my own, and I heard other people say the same exact thing," said Virgil Shockley, a chicken farmer and Worcester County commissioner.

Shockley also said if there are irrigation systems on the farm, farmers face $50-$75 per acre more in land rent.

One main reason for the increased appreciation of agricultural land is there's less of it in Worcester County, and there won't be any new farmland created anytime soon.

"The biggest threat to the poultry industry is not EPA or MDE (the Maryland Department of the Environment) -- it's building houses where acres of corn used to grow," Shockley added.

Pete Richardson, a property auctioneer, said market values for farmland, in his experience, have not seen a steep decline in value like residential properties have, if any.

"Say it's 95 percent tillable land and 5 percent woodland -- that has not gone down in value at all," said Richardson, who is also a former soybean and corn farmer in Willards.

The value of unfarmed woodland has also dropped dramatically, Richardson added.

"We know this much: the demand is a lot weaker," he said. "Most woodland owners are not in a forced sale position. The demand for large woodland tracts is less than it was during the boom years. It's primarily recreational land. It doesn't produce a significant amount of income. The recreation dollars aren't here anymore, so you have less buyers."

Both Shockley and Richarsdon said creating new farmland involves clearing trees from major acreage; that's a challenge based on modern state and federal regulations, and the sheer cost of starting things up.

And even if a person did start that farm, Richardson said, "it takes two or three generations. There are guys that have successfully started out, and got operations going, but it takes 30 or 40 years to get there. But it's tough. You gotta have a lot of capital."

Stephen Hales, Worcester County's clerk of the circuit court, who deals with land records, said real farmland rarely turns over to new ownership and will generally stay in a family.

Hales also said when it comes to establishing value for a property, there are a lot of moving parts.

"Is it well-drained? Is it prime farmland? Is there timber on the property? There (are) so many factors to the equation," he said.

The U.S. Agriculture Department's 2007 census of agriculture showed 384 farms in Worcester County, with the average farm size at 289 acres. Corn and soybeans were the top crop items.

Agricultural property values have swung up and down for Worcester County in the last few years, according to Maryland's Department of Assessments and Taxation.

Worcester's real property taxable assessable base for agricultural land was about $305.5 million as of July 2011. That figure for 2009 was $338.2 million, and $324.5 million for 2010. For 2008, it was $305 million.

Land prices seem to have held steady in Sussex County because the value of their product is on the rise, said Daniel Magee, a Williamsville farmer.

"I guess it depends whether you're buying or selling," Magee said. "The reason farmland values have held partly is because of the price of the product that we sell, which has gone up pretty good. Corn, soybeans and wheat have gone up pretty good. Therefore, the product we sell has increased in value, whereas houses have decreased in value. That's pretty much where it lands."

Another factor involves how residential home values -- and their equity -- have collapsed, while agricultural lands have held strong, said Vance Phillips, a Laurel farmer.

"It's there and the value when banks consider loaning money, what's really held steady if not improved, is the agricultural component of (zoning), and that's because grain prices have gone up and because the vegetable industry is very healthy in Sussex County," Phillips said. "Many farms were sold for (up to) $20,000 an acre during the boom; there's nowhere that those values are realized today."

Phillips also noted that the vast majority of the open land being sold is for development, not farming.

What ultimately anchors the value of farmland continues to be the poultry industry, Phillips said.

"It is the glue that holds everything together here," he said. "So with high grain prices, it makes it pretty difficult on most folks, and we've seen that. That is a double-edge sword. It's great to have high grain prices, but we need to have someone to sell that grain to."





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Buying and selling of agricultural land can be very complex.  To help you tackle the issues surrounding agricultural land transactions, Farms.com Real Estate has compiled a list of experts in the areas of agricultural economics and land values. 

University of Illinois

Department of Agricultural and Consumer Economics, Extension Specialist, Farm Management
Gary Schnitkey
schnitke@uiuc.edu

Department of Agricultural and Consumer Economics, Extension Specialist, Farm Management
Dale Lattz
d-lattz@uiuc.edu

Iowa State University

Michael Duffy
mduffy@iastate.edu
http://www.econ.iastate.edu/faculty/duffy/landnew.html

Kansas State University

Kevin Dhuyvetter
Professor and Extension Specialist, Farm Management
kcd@ksu.edu

Terry Kastens
Professor and Extension Specialist, Farm Management
tkastens@agecon.ksu.edu

Michigan State University

Stephen Harsh
Professor and Extension Specialist in Agricultural Economics
harsh@msu.edu

Eric Wittenberg
Outreach Specialist
wittenbe@msu.edu

University of Minnesota

Philip Raup
Professor Emeritus
praup@umn.edu

David Bau
Agricultural Business Management, Agricultural Business Management
bauxx003@umn.edu

 

 

 

 

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