What’s Organic Farmland Worth? Or Is It A Pearl Without Price?

From Gene Logsdon

A cash grain farm in the cornbelt sold recently for an eyebrow-raising price just shy of $9000 an acre. It sold for farmland, not industrial development. I suppose that shouldn’t be surprising when USA Today reports that yachts over 80 feet long are still selling at all time high levels despite these disastrous financial times. But I can’t see how corn and soybeans will pay for such high-priced land. The grain markets are way down from summer. Demand for grain from developing countries is down. At least five ethanol plants that were supposed to turn corn into fuel have declared bankruptcy. Fertilizer, seed, and fuel costs are still historically high— fertilizer is selling for as much as a thousand dollars a ton. Some farmers have already bought their seed and fertilizer supplies for next year, thinking that these costs would continue to rise along with grain prices. What if grain prices stay down? We could be looking at a possibility of what one farmer I talk to a lot calls “instant bankruptcy.”

One thing is for sure: it is a very good time to be an organic farmer.

If you can borrow money at 7%, the cost for owning $9000 per acre land is $630 per acre by the way I do accounting. Overhead costs for growing a commercial corn crop right now are around $300 an acre or a total of over $900 an acre. Obviously, farmers who pay that kind of money for land are betting on five or six dollar corn or more. (The price as I write is $3.75.) They are speculating on future expectations, the same way the paper money market has been doing.

It is a puzzle to me that in assessing the market value of farmland, seldom is attention paid to whether the soil is organically-managed or not. Surely with its built-in, low-cost methods for avoiding soil compaction and erosion, and its ability to increase organic matter content in the soil, a long term organic farm ought to command a higher price than conventionally farmed corn land. But I bet a hilly organic dairy farm, using manure and legume rotations for fertility, would not bring as much per acre as a level mono-cropped grain farm that has been beat half to death with huge machinery and toxic chemicals. The fields of the dairy farm would hardly be big enough for a huge harvester to turn around in and therefore not desirable. Why so few mentions of this topic, especially now when inputs for chemical farming are so high?

I don’t know what is going to happen with land prices (I think they are going to tank) and bring up this question mainly to show that large scale, agribusiness farming is a risky undertaking and getting riskier. We have accepted the notion that land is a commodity to be bought and sold like paper on the stock exchange. This has led to at least two bad results in addition to high risk speculation with something more precious than paper— our food supplies: 1): Poorer people can’t afford to buy farmland so farms slowly become the property of an oligarchy of the rich; 2): To make a “profit” even rich people must farm for quantity not quality and then the land deteriorates.

More than a few economists have tried to point this out, especially in the economic literature of the Great Depression. (Look To The Land by Lord Northbourne, published in 1940, reads as if it were written today.) But no one has been able to come up with a workable plan to remove farm land from the commodity market. Money always seems to rule. If you give human beings the choice of taking $9000 an acre for farmland or $8000, they will, of course, take the former.

But not always. I once asked a contrary farmer why he didn’t sell out and live at ease for the rest of his life, which he could have done especially since he was happy to live modestly. He paused a little and then answered. “My farm is not for sale at any price. It is my life. And what would I do with all that money, stick it in my ear?

There’s an old joke that is appropriate here. In a certain village lived a man who was thought to be mentally-challenged or in plainer language, he was an example of classic literature’s “village idiot.” He was made the butt of a cruel joke. Village wiseacres loved to offer him the choice between a nickel and a dime. He always took the nickel because it was bigger, he explained. The jokesters of course got a big laugh out of that. One observer pulled the village idiot aside one day and asked him why he kept on taking the nickel. “Surely by now you know that the dime is worth more.” The village idiot smiled. “Oh I know that, but if I choose the dime, those morons will stop giving me nickels.”

I and many thousands of small farmers are the village idiots of agriculture. We farm because we like to make little paradises out of our land while growing good food on it. What we make as a return on investment in money doesn’t matter as crucially as it does for the dime-takers. We often choose the nickel because we have learned that taking the dime means servitude to commodity markets and agribusiness giants over which we have no control.

Society comforts itself during financial bad times by looking forward to recovery which has always come. But will recovery this time mean a return to the present “sanity” of always taking the dime? Irresponsible and uncontrolled credit is blamed for the current dilemma. What if that is an effect of the dilemma, not the cause? Dare we contemplate the notion that some economists are suggesting, that natural resources can no longer keep up with exponential money growth, that the kind of money-lending we have been doing only works when it is tied to the realization that resources like oil and farmland are limited? When real resources and therefore real money (organic money) start running out, will we need a new kind of financial system that finds other ways to keep the economy going than piling fake money on top of fake money until the whole house of credit cards collapses?

If a new day comes, a farm will be priced by how much health and happiness it produces.
~
See also Gene’s Wood Is More Precious Than Gold
~~
Gene and Carol Logsdon have a small-scale experimental farm in Wyandot County, Ohio.
Gene is author of
The Mother of All Arts: Agrarianism and the Creative Impulse (Culture of the Land),
The Last of the Husbandmen: A Novel of Farming Life, and All Flesh Is Grass: Pleasures & Promises Of Pasture Farming

Image Credit: Dave Smith, Village Acres Organic Farm, Mifflintown, Pennsylvania
OrganicToBe.org
| OrganicToGo.com

Gene’s Posts
[Permanent Link] [Top]

8 Comments

I haven’t paid $9,000 and acre, but perhaps can give you an idea how someone who would might think.

You are thinking of corn in terms of so many bushels per acre. As a potential buyer, I’m thinking of a diversified crop of vegetables.

Let’s say I buy an acre of land which is about 41,000 sq. ft. I decide I can actually plant about 24,000 sq. feet. I figure I can work an acre using a tiller and hand tools. A drip irrigation system would cost in the neighborhood of $4,000. So, I go to the supermarket and figure vegetables cost about $1.00 per serving. I’m able to get about 2 servings out of each square foot I’ve planted.

So, about $2.00 per square foot not counting succession planting. I figure about half will be able to get two crops a year. So each square foot is worth about $3.00. So, my income will be about $72,000 an acre minus say $10,000 in expenses. So I figure I can make about $62,000 a year from 1 acre.

Of course, I’ve made all sorts of bad assumptions. Sales is the critical one.

People make these sorts of errors all the time. I know someone who expected to make $45,000 a year by selling 60 CSA shares for $400 apiece. Huh?

So, I downsized my expectations and finally ended up with a 1,000 square feet of planted space in my backyard. We have been getting all our vegetables from it for the last 10 weeks and expect another 6 weeks or so of vegetables. Since we spent about $100 a week on vegetables, this is $1,600 saved. Not counting the tiller, we are probably about breaking even.

But my daughter’s migraines have disappeared. I’ve lost about 20 pounds and 8 inches off my waist. My blood pressure is now 119/64 when it had been a little higher. And I’ve all but given up a more expensive hobby.

My daughter planted some pumpkins on a whim. At the end of the season we will have a garage sale and maybe sell $20 of them for $2.00 apiece. After paying a couple dollars for seeds, we will net $38. That’s about twice as much as a corporate sized farmer will make from an acre of corn.

My nickel’s worth of land is doing just fine. But I’m still eyeballing something bigger.

One solution to high land prices is co-operative ownership. Can’t afford the payments on a $900,000, 100 acre farm? What about if ten people went together to do it?

Personally, I think good quality farmland will not go down in price, or at least it won’t go down as much as suburban McMansions. Food is going to get more important Real Soon Now as the price of oil whipsaws up and down. Oil is food! At least in conventional, fertilizer/pesticide farming, which is still the vast majority.

People are relieved that oil, once nearly $150 a barrel, is now almost down to $60. Some day, they’ll be happy to see it return to $500 a barrel, down from $850. They ain’t putting any more dead dinosaurs in the ground! The world has never seen more than 85 million barrels pumped in a day — and that was in May, 2005! We’re on a plateau that can’t continue, and soon, oil production is going to start dropping, perhaps as much as 7% a year, which means we’ll have half as much in just ten years.

How are we going to feed everyone as oil becomes more and more scarce? The answer may well be organic farming, but that means more land in most cases, which means farmland will remain valuable.

To Mike S from Gene Logsdon I will be signing books at the Buckeye Book Fair in Wooster Ohio (on the campus of the Ohio Agricultural Research and Development Center on Nov. 1 all day. I think that’s the last one this year.

I love these articles, they are great. I’m trying to pick out a nice plot of land to enjoy someday and the whole proccess is overwhelming. The more a learn, the more I feel I don’t know. You have been a great help. Also, I just finished reading The Contrary Farmer and really enjoyed it. I would love to meet you some day, so please let us know if you do booking signings or workshops anywhere.

Stuck in an office,
Mike S.
Dayton, OH

Kerri from Gene, I think you’ve got it right on the button. Here’s a true example of what the future could bring. In Belgium over the last 40 years, land has become so precious that in some instances towns pried up their sidewalks to make more garden space.
Granny Miller from Gene, Ditto the above. Thanks to both of you for writing.

I sure hope you’re correct that land prices will tank. Or, at least, tank in Alaska. Got my eye on a couple of vacant properties in my urban neighborhood that aren’t built on. One was farmed up until about five years ago and the other had a ramshackle rental building torn down about a year ago. The rental building lot has had For Sale signs on it with no takers. The other lot was growing birch seedlings until a month or so ago when someone came through and cut them down. But no action on either lot since then. I’m looking to expand my garden space in the near future with nearby lots if possible. The city has community garden space but nowhere near where I live. Yeah, I suppose I could partake in guerrilla gardening on vacant lots but I’d rather be safe and own the land myself.

I suspect that the land is “valued” somewhere up where unrealistic residential land values are but the housing market has slowed in Anchorage. Housing is being sold extremely slowly and very little new construction has been done in the last year. The new construction I’ve seen in the neighborhood is still up for sale. So I’m hopeful that the lots up for sale won’t sell at the price asked and will slowly come down. I’d love to have the opportunity to create some urban organic farmland less than two miles from downtown. I could make it look pretty and produce food at the same time. What do you think??

Kerri in AK

Very well said Gene.

The current economic “crisis” has given me a renewed hope for small family farms, little homesteads and even folks living on 1/2 acre suburban lots.

I expect to see a renaissance in backyard chickens, bunnies, milk goats, vegetable gardening & home canning.
I also expect a national and collective reevaluation of basic life assumptions and the shunning of Madison Avenue.

Hopefully affordable land & a sustained downturn in the money economy will be an opportunity for young people to get started with their own small farms & little places.
I wouldn’t be at all surprised to see “rent to own” and “article of agreement” deals popping up all over the countryside between big petroleum farmers and small farmer wanna bes.
When mortgages can’t be had & big ag debts come due it will seem like an attractive alternative.

Hopefully people will begin to see the foolishness of certain zoning restrictions and/or “convenants” and demand repeal.

Clotheslines, wood piles, small livestock, vegetable gardens etc. will bring a greater sense of security to many people who now are prohibited from taking care of themselves.
Snobbery and middle class TV aesthetics won’t put food on the table or keep the pipes from freezing.

    Granny,

    In Colorado, all restrictions on clotheslines and solar panels are void.

    This year, I lost a 1,000 sq. foot garden in my front yard due to covenant restrictions. It wasn’t worth fighting as I could see they would win. I’d like to see a national voiding of these types of restrictions. It did make me feel good that all my neighbors were sad to see it go.

    There is also a restriction on raising chickens. An excuse that my chickens are full grown probably wouldn’t fly (pun intended) so I won’t try it.

    Meanwhile, I’ve started to become sickened by perfect lawns knowing the ecological disasters they are harboring with chemicals, water use, lack of environment for bees, etc.

    Haha, I’m a small farmer wanna be. But sales is too big of a problem. Still, I’m working on getting some land to start real small and without debt.

Please leave your comments...

Name and email address are required. Your email address will not be published.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

You may use these HTML tags and attributes:

<a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <pre> <q cite=""> <s> <strike> <strong>