North Dakota farm real estate values continued to rise along with commodity prices and increased demand, setting a record for the fourth consecutive year in 2008.
Farmland real estate was valued at $765 per acre this year, up nearly 18 percent from last year and 33 percent from 2006, according to the North Dakota field office of the USDA's National Agricultural Statistics Service.
The average, which includes farmland and buildings, increased for the ninth straight year. Since the 2004 figure of $455 per acre, which was equal to the 1982 average, a record has been set in North Dakota every year, said Brian Kugel, a statistician with the North Dakota Agricultural Statistics Service field office in Fargo.
John Botsford, president of Grand Forks-based Botsford & Qualey Land Co., which sells farmland, said land values in Grand Forks County increased about 15 percent last year.
He said farmland values in the county range from $500 to $3,000. Botsford said prime farmland was selling for as low as $1,000 an acre in the late 1980s and that land today would fetch $2,500 to $3,000 an acre.
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"The entire Red River Valley has been experiencing tremendously stronger values," Botsford said.
Botsford said commodity prices play a role in land value, but that it also has increased recently as some have begun viewing land as an alternate investment opportunity to playing the stock market.
"Land is seen as a safe-haven investment," he said. "Especially in times of economic turmoil."
North Dakota has one of the lowest farm real estate values in the nation, partially influenced by its weather extremes.
"We have a relatively risky climate to produce crops in," said Dwight Aakre, a farm management specialist with the North Dakota State University Extension Service. "Consequently, we've had maybe a little more room to increase (in values) than most states on a percentage basis," he said.
But while the value of their land is higher on paper, it doesn't mean that farmers are getting rich off land value, unless they are selling their land. In fact, some are buying up land to expand their operations, despite the high land prices.
It can be a risk, but officials said the chance of a repeat of the 1980s farm economy collapse is small, even if crop prices crash.
"Values have gone up and down before," Botsford said. "There's always a risk in any booming market that values can turn. However, there seems to be far less debt today. The land is held by more solid ownership than in the '80s."
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Aakre agrees.
"The big difference now from the land boom in the 1980s is that a lot of the land is paid for with cash," Aakre said. "There's not a lot of leveraging like in the '80s."
Scott Tewksbury, incoming president of the Independent Community Banks of North Dakota, said most of the farmland loan requests seen lately at his Edgeley, N.D., bank have been from "well-established" farmers, not those just getting into the business.
"The people that we've financed lately have had substantial cash equity for their purchases," he said. "There's more true money being made than there was in the '80s. If they're putting substantial equity -- we're talking 60 percent -- down, I think the equity position is strong enough that the risk is manageable."
Aakre said farmers have been able to buy land lately because of record crop prices that have boosted farm income, and finance rates have been favorable in recent years.
Botsford said the trend has been toward larger farming operations. But he said that doesn't mean that the family farmer is a thing of the past. He said the definition of what a family farmer is has evolved over time as operators have expanded their operations to stay profitable in light of increased costs, including equipment.
North Dakota's 19.4 percent increase over the year in cropland value was behind only Nebraska and South Dakota.
USDA said the average value of North Dakota cropland is $800 per acre, and pasture values have climbed to $350 per acre. Both are up more than 16 percent from last year.
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Grand Forks, Pembina, Walsh and Traill counties were among 11 of the state's 53 counties with average land values of rented land of $1,000 an acre or more, according to a survey of farmers by the North Dakota field office earlier this year.
The survey, completed in January and February, found Pembina County had the second-highest average value of rental land in the state at $1,663 per acre. Trail County (1,569 per acre), Walsh County ($1,256 per acre) and Grand Forks County ($1,069 per acre) also topped $1,000 an acre in the survey, with all four counties seeing sizable jumps in value from survey results in the previous five years.
The average cash rent value (or rental rate) for cropland in the state is $45 per acre, up about 10 percent from last year, although several local counties had higher values. Cash rent for pasture averages $13.40 per acre, up 90 cents.
Nationally, USDA said farm real estate values averaged a record $2,350 per acre in January, up about 9 percent from 2007. The agency cited strong commodity prices, farm programs and tax incentives among the reasons for the increase.
Herald Staff Writer Ryan Schuster and The Associated Press contributed to this report.
