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Farmland Prices Likely to Rise, Analyst Says

April 24, 1989

WASHINGTON (AP) _ Prices of farmland nationally may show further increases this year, but an Agriculture Department analyst says it’s too early to make a fine-tuned prediction.

Roger Hexem of the department’s Economic Research Service said a tentative forecast made last December calls for farmland value gain of around 2 percent to 4 percent in the reporting year that will end on Feb. 1, 1990.

″I would suspect nationwide it’s going to be up some,″ Hexem said, but exactly how much the gain will be depends on 1989 farm income, interest rates and other factors.

Hexem’s remarks in a telephone interview followed USDA’s report last week which showed farmland values nationally, including buildings, rose 6 percent in the year that ended on Feb. 1 to an average of $597 per acre, compared with $564 on Feb. 1, 1988.

Although it was the second annual increase, the U.S. farmland average was still far below the peak of $823 per acre in 1982.

Improved farm income and a rosier outlook for the future have helped bolster the land market the last couple of years.

State figures provided by the USDA agency at the request of The Associated Press showed 1989 average farmland prices were up in all but seven of the 49 states regularly reported. Hawaii was not included.

Declines were reported for Alaska, Arizona, Texas and Wyoming. Prices were unchanged in Colorado, Oregon and Utah.

Hexem said that the figures for Texas and Oklahoma, included as ″Southern Plains″ states in the breakdown of regions, may prompt the most questions. On a statewide basis, Texas farmland was valued at $443 per acre, down about 5 percent from $466 a year earlier.

Oklahoma, on the other hand, was reported at $459 per acre, up 9 percent from $421 on Feb. 1, 1988.

Hexem said about two-thirds of the farmland in Texas is made up of pasture and grazing land, and that when those prices change it ″sort of swamps″ the changes in cropland.

According to a Texas A&M analyst, he said, pastureland and rangeland ″got bid up too high″ in earlier years when values were on the rise and a ″lot of people wanted to be land owners, wanted to have a small ranch.″ Lately, with the sagging oil economy and other problems, Texas pastureland hasn’t been in such strong demand for residences or recreation areas.

However, Oklahoma cropland and pastureland have both increased in value, meaning an overall increase in the value of the state’s farmland.

Hexem said last year’s drought hasn’t shown up significantly in national and state figures, perhaps due in part to some feeling that ″one dry year doesn’t necessarily mean the next one’s going to be dry, too.″

But Hexem said the land value survey was done in January and that was ″before whatever is unfolding now″ in terms of further dry weather and economic factors that bear on farmland prices.

Looking at the historic high levels of land prices in 1982 - a national average of $823 per acre - some states have increased and many have declined in farmland value.

In Iowa, for example, the 1982 average was $1,889 per acre. This dropped to $748 in 1987 and then rose to $890 in 1988 and $1,041 this Feb. 1. Hexem, who is from southwestern Minnesota, said his home state - which averaged $1,272 per acre in 1982 - showed similar declines, bottoming out at $493 in 1987 before rising to $563 in 1988 and $602 this year.

But in the Northeast, where large cities encroach into the countryside and there is a demand for farmland as living space, the average value in 1982 was less than it is today. Maine, for example, had an average farmland value of $680 per acre in 1982 and $1,323 this year, and New Jersey’s farmland rose to $7,241 from $3,181 in six years.

Here is a state-by-state list of average per-acre values of farmland and buildings, in dollars. The first columnshows the value as of Feb. 1, 1988; the second is the value as of Feb. 1, 1989.

Alaska, not on the following list, was reported at $1,071 per acre, down from $1,322 a year earlier. There was no listing for Hawaii. NORTHEAST Maine 1,236 1,323 New Hampshire 2,037 2,180 Vermont 1,345 1,439 Massachusetts 3,544 3,782 Rhode Island 6,240 6,676 Connecticut 4,914 5,258 New York 956 1,014 New Jersey 6,189 7,241 Pennsylvania 1,819 2,201 Delaware 1,895 2,217 Maryland 2,014 2,216 LAKE STATES Michigan 853 879 Wisconsin 630 661 Minnesota 563 602 CORN BELT Ohio 991 1,051 Indiana 983 1,061 Illinois 1,114 1,225 Iowa 890 1,041 Missouri 572 606 NORTHERN PLAINS North Dakota 292 301 South Dakota 187 204 Nebraska 366 421 Kansas 368 390 APPALACHIA Virginia 1,143 1,292 West Virginia 542 569 North Carolina 1,062 1,126 Kentucky 786 810 Tennessee 1,104 1,126 SOUTHEAST South Carolina 874 953 Georgia 865 943 Florida 1,596 1,692 Alabama 731 760 DELTA STATES Mississippi 658 678 Arkansas 645 664 Louisiana 708 722 SOUTHERN PLAINS Oklahoma 421 459 Texas 466 443 MOUNTAIN STATES Montana 164 167 Idaho 592 621 Wyoming 140 136 Colorado 364 364 New Mexico 132 141 Arizona 214 212 Utah 428 428 Nevada 193 199 PACIFIC STATES Washington 699 727 Oregon 466 466 California 1,341 1,421

48 states 564 597

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