Tuscola County farmland has doubled in market value in the last decade and is now worth nearly $1.9 billion, but experts warn a slowdown may be in store for 2016.
According to data from the Tuscola County Equali-zation, the assessed value of agricultural land has risen from about $450.9 million in 2005 to about $936.1 million in 2015.
That puts the market value — typically double the assessed value — of agricultural land in Tuscola County at about $1.9 billion, up from about $901.8 million in 2005.
“Farmland is worth more than any other kind of real estate right now,” said Lynn Borcherding, owner and real estate agent at Vassar-based Area Wide Real Estate L.L.C.
Borcherding said she’s been in real estate for 26 years and has never seen prices this high for farmland.
“There’s been a constant upward trend in the value of farmland,” said Walt Schlicting, director, Tuscola County equalization.
Data from the county equalization department shows that Tuscola County’s agricultural land is valued at $8,200 per acre for land with the highest quality soil. That’s compared with $2,400 per acre for agricultural land with the highest quality soil in 2005.
“It’s not unusual to see farmland selling for $7,000 to $10,000 an acre this year,” said Schlicting. “Ten years ago it was more like $3,000 or $4,000 an acre.”
Farmland values also were immune to the 2008 recession.
In fact, data show the market value of farmland in Tuscola County increased $68 million in one year between 2008 and 2009.
Industry experts say there are numerous reason farmland values keep going up.
One reason, said Carl Bednarski, president of the Michigan Farm Bureau and Tuscola County farmer, is the ever-increasing demand for the variety of commodities produced by Michigan farmers means the land used to farm those commodities maintains or increases value.
For example, Bednarski’s 1,400-acre farm produces corn, dry beans, sugar beets, soybeans, and wheat.
“We have such a diverse commodity selection in Michigan that allows us to capture more markets,” said Bednarski. “We’re not necessarily in just the corn, just the wheat, or just the soybean markets…we have soft white wheat, for example, our dry beans are very unique, and of course sugar had done well here whereas there have been problems in other parts of the world.”
Not only that, he said, but doors have been opened to China and other new global markets, helping sustain the farming industry.
Another factor has been the evolution of farming technologies over the last 10 years — technologies that have helped make farming a better financial proposition, said Keith Aeder, appraisal group manager, GreenStone Farm Credit Services in Caro.
“The technology that’s in a bag of seed today makes everybody a better farmer,” said Aeder.
He points to the local sugar industry as a prime example.
“About a dozen years ago the factory average was about 18 or 19 ton an acre year-in and year-out,” said Aeder. “With increased use of Roundup Ready sugar beets…the factory average this year was over 31 tons (an acre). You can do that math on that.”
The local area’s strong ties to sugar also help, he said.
“The fact that we have a sugar industry here that’s established is huge,” he said. “We have the infrastructure, we have the factories, and we have the processing capacity.”
Aeder said increased demand for organic crops grown in the area also has helped sustain the market and cause farmland values to go up.
Despite the increase in land value and evolving technologies, Aeder warns that farming is far from a sure bet when it comes to making money. One reason, he said, is that it costs money to make money.
“Farmers historically have spent their money on two things: money and land,” said Aeder. “I’ve seen an 80-acre parcel go for more than $1 million. You can’t come close to making a living on an 80-acre parcel.”
Then, there is the problem of doing too well, which can drive down prices. For example, the cost of corn and soybeans per bushel has fallen by almost half in the last three years.
Bednarski said such changing market conditions should temper expectations when it comes to farmland values going forward – at least for now.
“I think we’re going to see some stabilization and maybe even a decline in the value of farmland,” Bednarski said. “With the commodities the way they’re trending, I think you’re not going to have the resources available to drive that price of land up any higher.”
Andrew Dietderich is news editor of the Tuscola County Advertiser. He can be reached at firstname.lastname@example.org