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Published June 13, 2009, 09:29 AM

Potential farmers, ranchers stymied by high land prices

SALEM — When Taia Huls left the ranch to attend South Dakota State University, she longed for a career in agricultural.
“I knew all I wanted to do was work with livestock,” Huls said.
The love of livestock led her to get her animal sciences degree from SDSU and a master’s degree in ruminate animal sciences from the University of Nebraska-Lincoln. Technically, the 26-year-old Huls graduated in December 2008, but by November, she was already on her dad’s place three miles west of Salem, helping with 300 head of cattle.

By: Austin Kaus, The Daily Republic

SALEM — When Taia Huls left the ranch to attend South Dakota State University, she longed for a career in agricultural.

“I knew all I wanted to do was work with livestock,” Huls said.

The love of livestock led her to get her animal sciences degree from SDSU and a master’s degree in ruminate animal sciences from the University of Nebraska-Lincoln. Technically, the 26-year-old Huls graduated in December 2008, but by November, she was already on her dad’s place three miles west of Salem, helping with 300 head of cattle.

Someday, Huls wants her own cattle operation. It’s a dream that many young South Dakotans may have, but obtaining even a startup farm or ranch isn’t an easy feat.

“I just honestly don’t have enough assets to start my own,” Huls said.

It’s a typical problem for anyone wishing to buy a place, raise crops and livestock and live out their dream.

The number of young farmers in South Dakota is falling fast. The most recent census of agriculture, taken in 2007, shows only 242 farmers and ranchers in South Dakota under the age of 25, a 42 percent drop from the 414 reported in 2002.

The number of ag producers between the ages of 25 and 34 also fell, but less drastically, from 2,249 in 2002 to 2,113 in 2007.

While the number of agricultural producers under the age of 34 may have declined, the difficulties of entering the world of agriculture have not.

Will the tightening economy make it more difficult?

That’s a subject that has been “discussed, debated (and) cursed,” according to Burton Pflueger, farm financial management specialist with the SDSU Cooperative Extension Service and a professor in the school’s economics department.

Pflueger doesn’t believe the economy has made a significant difference.

“Maybe the amount that’s being loaned might be a little bit less than it has in years prior but, as far as a creditworthy borrower, I think they still do not have any problem getting necessary financing,” Pflueger said. “It may take a little more documentation to prove their case.”

According to Pflueger, the challenges that were there for beginning farmers in 2002 are the same as they are today.

“They still have high startup costs (and) credit issues are going to be there,” he said.

The trouble, many say, is land, and the costs and troubles in acquiring it. If a young farmer isn’t in line to inherit a place, he may be out of luck.

Land values rise

The SDSU South Dakota Farm Real Estate Survey — co-authored by Pflueger — shows that state cropland values increased an average of 26 percent from 2007 to 2008. Cash rental rates for cropland increased by 15.2 percent.

In February 2008, the average value of non-irrigated agricultural land in South Dakota was $1,041 per acre, with prices varying from $295 per acre in northwest South Dakota to $2,473 per acre in the east-central region.

With the price of land only rising, many beginning farmers have trouble finding available land that fits within their limited price range.

“You’ve got to find somebody that’s trying to purchase land that can afford it (and) has a little bit of equity that he or she can put in the game. That gets tougher and tougher,” said Jon Farris, a business development and marketing specialist for the state Department of Agriculture. “With competing interest in agriculture with land for recreational use, as well as more established farmers that are looking to grow, it’s a tough market for a beginning farmer.”

Another problem: Farms are getting bigger, and smaller starter places are getting fewer and farther between. Jamie White, USDA-FSA public affairs specialist, said the growing trend of larger operations makes it difficult for a new producer to get in the agricultural game.

“When you’ve got big operations, it does drive up the land values,” White said. “It drives up rental rates and it makes it difficult for the average producer to get in and farm smaller acreages as well.”

Even if a young farmer can find the available land, financing is another problem.

“A farmer that’s spent his life farming and doesn’t have someone to pass that asset onto, that’s his 401(k),” Farris said. “If it was yours, you’d want as much for it as you could get.”

“That’s the biggest challenge to producers,” Studer said. “Getting the money upfront to do something like that is nearly impossible.”

Programs to help

To encourage those with dreams of owning a farm or ranch of their own, various agricultural organizations and the state have programs in place.

• The Farm Service Agency offers loans for farm ownership and operating loan funds for beginning farmers. The maximum loan amount for either is $300,000. The loan is to be repaid over 20 years at an interest rate of 4 percent below the direct farm ownership rate, but not lower than 1.4 percent. The FSA also gives eligible beginning farmers first priority to purchase inventory property.

• The South Dakota Department of Agriculture’s Division of Ag Development has a Beginning Farmer Bond Program, through which $10 million is made available annually for those wanting to make a living off the land.

• The South Dakota Farmers Union has worked with the SDSU Extension Office and other entities this year to hold estate planning meetings to help with the “transition from the old farmer to the new farmer,” according to Chris Studer, SDFU communications and marketing director.

The Farmers Union is also pursuing a $100,000 grant to start a program called Young Producers 2010. Studer said the SDFU also encourages young producers to participate in SDFU’s Rural Economic and Leadership Development Program.

• In 1994, the South Dakota Legislature authorized a property tax freeze for agricultural property for beginning farmers. County commissioners can authorize the freeze for up to five years after a beginning farmer purchases ag land.

One of the first places aspiring producers can look for startup money is the Beginning Farmer Bond Program. Those approved can receive up to $450,000 for agricultural land and improvements, including livestock and equipment.

Since the state Department of Agriculture put the program into place locally in 1996 — the program itself begin in the 1950s — 308 beginning farmers and ranchers have borrowed more than $35 million.

Farris, of the Department of Agriculture, said the money comes through a “tax-exempt bond that a lender uses to pass interest savings onto the borrower.” Farris said he did not have participation numbers for each year, but said participation peaked in 2000, when $4.2 million was distributed across the state.

The reason that the $10 million cap has never been reached, Farris said, is simple: the price of land keeps participation down.

While Huls thinks programs like the Beginning Farmer Bond are great, she chose not to participate. Her plan is to raise cattle with her father while hopefully working professionally and utilizing her college degree.

She has submitted applications and attended a few interviews, but the job search so far has been fruitless. The job market for someone with her education looks strong in places like Oklahoma and Texas, but Huls is doing her best to stay in the region.

Even though she has yet to obtain other employment, Huls is sticking to her plan. She wants to slowly acquire a percentage of the family’s cattle over the next decade and ideally, invest in land adjacent to her father’s ranch and slowly expand her holdings.

Of course, the trick is finding the land and then the money to pay for it.

“If an opportunity like that came up, (it) would be of interest to me,” Huls said. “I want to stay within some radius of the homeplace so that I can be involved.”

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