The value of farmland in Arkansas has soared in recent years, buoyed by the high prices developers are willing to pay for agricultural land.
“Many factors affect farmland values, but I suspect that non-agricultural uses of pasture land, such as urban sprawl and desire to live in rural areas, are causing pasture land values to increase faster than other types of farmland,” said Terry Griffin, assistant professor/economist with the University of Arkansas Division of Agriculture.
This is especially true in northwest Arkansas where an economic boom has expanded from cities into the countryside.
Rising farmland value has been the trend over the last 60 years in Arkansas, with a few exceptions along the way. During the 1970s, farmland values increased by nearly 200 percent. But that was followed, from 1982 to 1987, by a 34 percent decrease from the highest point. Over the decade of the 1980s, values were down 13 percent.
It wasn't until 1998 that the previous Arkansas farmland value high — set in 1982 — was reached again, Griffin said.
Since the lowest farmland values were set in 1987, farmland has increased 218 percent. This long-term trend in Arkansas farmland values is not unusual.
Farmland values in many other states followed similar trends of increased values during the 1970s, followed by similar decreased values in the 1980s, with a steady increase since the mid to late 1980s.
“With only two minor exceptions in 1990 and 1992, Arkansas farmland values have been on the rise since 1987.”
For the last four years, farmland values have increased at, or above, 10 percent and have increased at least 5 percent since 2001.
All types of farmland values are rising: farm real estate, cropland, irrigated cropland, non-irrigated cropland and pasture land.
“The most notable increase has been in pasture land relative to cropland, whether irrigated or non-irrigated,” Griffin said. “Pasture land values have been increasing at a faster rate than the other types of farmland and have surpassed the value of cropland.”
In 2007, the value of pastureland surpassed that of irrigated cropland and is approaching the per-acre value of farm real estate, which includes buildings and facilities. This trend in pastureland values has also been documented in surrounding states.
Griffin said farmers are right to be alarmed by the trend of rising values as land is gobbled up around them and high land values make it difficult for them to buy new land for expansion.
He said the USDA reports the increase in farm real estate values continues to be driven by a combination of many factors, including strong commodity prices and farm programs, outside investments, favorable interest rates and tax incentives and continued commercial and residential development. The USDA said it's uncertain if farmland values will continue to increase in value, remain steady, or begin to decline.
You can read Griffin's agricultural economics newsletter by going to www.uaex.edu and selecting Agriculture, Newsletters and Farm Management and Marketing. The Cooperative Extension Service is part of the U of A Division of Agriculture.