By SHELLY STRAUTZ-SPRINGBORN
Michigan Correspondent

LANSING, Mich. — Michigan’s farm real estate values, including land and buildings, have dropped 3.8 percent since 2008 to an average of $3,750 per acre, according to the Michigan Field Office of the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS).

The state’s cropland and pasture values are also down. Cropland value dropped 3.2 percent from the previous year to $3,370 per acre, while pasture value decreased 3 percent to $2,550 per acre.
The trend is not surprising to Larry Faust, broker with Faust Real Estate, LLC of Adrian, who has been in real estate business since 1972.

“What has happened, in the last two or three years we have had developers and dairy farmers competing for land,” Faust said, which helped hold prices steady. “Both of these are out of play right now. There is very little development going on and dairy farmers are struggling.”

Faust said real estate is still selling, but more slowly and at lower prices than before.

“Most of our sales in the last year have been smaller parcels,” he said.

In Lenawee County, Faust said one 44.2-acre parcel of agricultural land recently sold for $80,000, or about $1,808 per acre, a 24.1-acre parcel brought $60,000, or about $2,489 per acre and a 32.18-acre parcel sold for $121,600, or about $3,778 per acre.
“Prices typically fall within ranges, but right now they are kind of all over the board,” he said. “About $2,500 to $3,000 per acre takes in most of the farmland right now. Prime farmland goes up to about $3,500 per acre.

“Overall, the market is down. There just haven’t been many sales,” Faust said.

Michigan’s market mirrors national trends.

U.S. farm real estate value averaged $2,100 per acre at the start of the year, down 3.2 percent from 2008, marking the first decline since 1987. U.S. cropland declined 3.9 percent from a year ago to $2,650 per acre, while pasture value declined 1.8 percent to $1,070 per acre.

Michigan Farm Bureau Land Stewardship Specialist Matt Kapp said the downturn in the nation’s economy has taken its toll on the real estate market.

“What we’re seeing is a reflection of lower commodity prices and a sluggish economy in general. A lot of farmland is owned by non-farm investors who rent the land to agricultural producers. When the economy sours, there are fewer land speculators to push up farm real estate values,” Kapp said.

According to NASS, other contributors to the national decline are decreasing commercial and residential development in many regions and a drop in demand for recreational land.

Even with declining farmland sale prices, increases were reported for state and national cropland cash rents. Michigan’s cropland cash rent on Jan. 1 was $83 per acre, up $5 from the previous year. U..S. cropland cash rent averaged $90 per acre, up $4.50 an acre over 2008.

Kapp said the increase in cash rent relative to declines in farmland value are not surprising because many rental contacts were secured in 2008, when commodity prices were much higher than they are now. He added that this downturn in the real estate market offers an opportunity for farmers to buy additional farmland at a lower cost.

“While the statistics are an accurate assessment of rental averages as of Jan. 1, 2009, they may be a bit misleading because many farmers will work to renegotiate contracts with landlords based on current market conditions,” Kapp said. “Also, some landowners and producers have shifted in recent years to crop share leasing agreements.

“Some farms won’t have the profit margins to take advantage but for those who do, this could be a good opportunity. It’s also a potential opportunity for beginning farmers who may have off-farm income,” he said.