Land values on the rise even for non-prime farmlandby Tom Robertson, Minnesota Public Radio
The price of farmland in Minnesota has skyrocketed over the past few years. But it's not just happening in the fertile fields of southern Minnesota or the Red River Valley. There's a cluster of counties in north central Minnesota where marginal farmland prices have jumped 150 percent or more.
It's not only record farm commodity prices that are driving land values up in the north. It's the huge demand for lands that can be used for hunting and recreation.
Bemidji, Minn. — Walker area realtor Norm Stubbs remembers selling a chunk of farmland in Cass County a few years ago for $1,000 an acre. Locals were shocked that the land sold for so much.
Today, Stubbs says that same piece of land would sell for more than twice that price.
"A 40-acre parcel these days brings roughly around $100,000," said Stubbs. "I've seen some go as high as around $130,000. For around here, the more wooded, the better."
The type of land Stubbs is talking about is considered agricultural land, but it isn't prime acreage. It's a mix of forest and farmland, the kind of land well suited for wildlife.
Some of the acres are being bought by farmers wanting to till the land and cash in on record high commodity prices. But Stubbs says it's deer hunting and recreation that's the driving force for the huge increase in land prices.
"People want to have hunting land," Stubbs said. "Even though there's so much public hunting land in the area, there's a certain group of people, some of which already have lake homes up in the area, they want to have their own. Most of the people that are buying it are from the Twin Cities market."
The land grab is happening in a handful of other counties, too, from Detroit Lakes in Becker County, eastward to Cass, Crow Wing and Aitkin counties north of Lake Mille Lacs.
Lands that were once used for small scale crop production or livestock pasture are being converted to recreational lands. Buyers most commonly use it for hunting or as a weekend playground for ATVs.
Will Yliniemi, an extension service educator for Becker and Hubbard counties, says buyers sometimes lease their productive ag acres to local farmers. But more typically they let productive land grow wild or plant it with trees.
Yliniemi says the recreational pressure is slowly changing the character of the landscape. Large farm properties are being divided into 20 or 40 acre parcels, where the new owners often build homes or cabins.
"You start breaking apart farms by selling off chunks here and chunks there, and then those probably will never have the capacity of going back into ag production," said Yliniemi. "I think that fragmentation is the biggest issue that I see."
Yliniemi says that fragmentation can affect the diversity of plant and animal species. He says it's also having an affect on local ag economies.
"As that acreage comes out, well, it changes the dynamics," he said. "The equipment dealers leave and the local elevators and feed stores, and the communities lose their identity a little bit."
It's not just farmers and hunters buying land in north central Minnesota. It's also land speculators. Roger Tinjum is president of an appraisal service in Detroit Lakes. He says with double and triple digit increases in land values, people see marginal farmland as a good investment.
Tinjum says for now, strong commodity prices are keeping values high on both class A farmland and marginal acres. But he's not sure how long the bubble can last.
"There's always cycles," Tinjum said. "If you go back to the 70s and 80s and we had strong value, we had strong commodity prices, then in the mid-80s, the late 80s, you had the bust. I'm not going to be a doomsdayer, but I anticipate that someday there's going to be a downturn again."
The need for housing is likely to put added pressure on marginal farmland prices. The population is growing in north central Minnesota, and that trend is expected to continue. USDA Farm Service Agency state director Perry Aasness says that means farmland prices are likely to stay high for now.
"Into the future, more and more competing pressure in some of the transition areas in the state, maybe perhaps north central Minnesota, some of the areas surrounding urban areas where there's competing uses, that land may be used for something other than agriculture," said Aasness. "We may continue to see a lot of increases in the farmland values in some of those areas."
There's worry in the agriculture industry that what goes up, must come down. But many experts believe that with the current record worldwide demand for commodities and a strong interest in land for recreation, farmland prices are unlikely to drop any time soon.
- Morning Edition, 08/26/2008, 7:48 a.m.