Arkansas land prices are increasing, a fact that has significance for row crop farmers and cattle producers.
The USDA's latest Arkansas farm real estate values, a measure of the value of all land and buildings on farms, averaged $1,820 an acre, up 10.3 percent from the previous year. The USDA's latest figures are for calendar year 2004. Data for 2005 will not be released until late 2006.
Cropland and pasture values rose by 10.1 percent and 20.8 percent, respectively. Cropland values averaged $1,420, and pasture values averaged $1,570.
Historically, agriculture land has been a good investment, said Bobby Coats, agricultural policy analyst for the University of Arkansas Cooperative Extension Service.
“For a landowner, if land values are increasing, his or her balance sheet is probably showing an improvement,” he said. The downside is that higher land values will lead to higher taxes, and it limits most producers' ability to buy land.
“If you're a producer and you own a significant amount of the land that you're farming, then you have a stronger balance sheet, and you're in a better position to manage price risk or large swings in prices. Thus, you have a stronger financial situation than a producer who rents all or most of his land,” Coats said.
However, a farmer trying to buy land will find that it's more expensive and difficult to purchase.
Another significant factor is that land in Arkansas is becoming increasingly difficult to buy with the mineral rights attached.
“There's an expectation that Arkansas has a significant amount of gas that can be mined. In a number of counties, oil and gas companies are leasing the mineral rights,” Coats said. “That drives the value of the land up and makes it increasingly difficult to buy land with the attached mineral rights, especially if the owner thinks the land has potential for gas production in the near future.”
Coats said there are other reasons for the strong demand for agricultural land, including strong domestic and global economic activity.
Many parts of rural America are becoming more residential because of urban sprawl or townspeople buying property outside of town to enjoy the peace of the countryside. This hunger for land in the country is helping bid the price up.
“In Arkansas, it's especially true in northwest Arkansas, around Jonesboro and Texarkana and in Pulaski and surrounding counties. Surrounding counties around Little Rock have explosive growth. Increasing numbers of Little Rock residents are moving into surrounding counties and buying a small piece of land and a few farm animals or an orchard.”
Coats said that another factor is land's attractiveness to sportsmen. He said hunters are buying land tracts and developing them for recreation, including duck hunting and fishing.
“We have low interest rates, so from an investment perspective it's an excellent time to invest in land. If it's row crop land, you can turn around and lease it out. If it's pastureland, you can rent it out.”
The economist said a downturn in the farm economy in 2005 has resulted in a significant number of farms for sale. “That doesn't necessarily mean that you have a lot of land being sold. Most of the sales involve farm machinery. Most row crop farmers rent at least a portion of the land they farm.”
Lamar James is an Extension communications specialist with the University of Arkansas.