ND farmland cracks $10,000 per acre

Wonder what "some of the absolute best cropland in the Red River Valley" is worth?

In what could be a state record for the per-acre value of farmland, an 80-acre parcel in North Dakota's Walsh County sold for $800,000, or a whopping $10,000 per acre, at public auction Thursday in Grand Forks, N.D.

About 50 people, both bidders and onlookers, attended the auction, which included the sale of farmland in North Dakota's Pembina County and Minnesota's Kittson County. Those parcels brought prices ranging from $2,125 per acre to $5,850 per acre. But the 80-acre parcel in Walsh County was the auction sale's crown jewel.

"Wow. That's really something," said Andy Swenson of the $10,000 per-acre sales prices. Swenson is a North Dakota State University Extension Service farm management specialist who tracks land rents and farmland values across the state.

North Dakota doesn't keep official records of per-acre farmland sales.

The highest per-acre cropland sales price in North Dakota of which he'd heard previously was $8,000, Swenson said.

Terry Longtin, Upper Midwest operations manager for Farmers National Co., which handled the Thursday sale in Grand Forks, said his company hasn't heard of a higher per-acre sales price in North Dakota.

Of the 80 acres in the Walsh County tract, 1.2 acres can't be cropped, leaving 78.80 tillable acres. That puts the $800,000 sales price at $10,152 per tillable acre.

Some details of the transaction, including the identity of the buyer, weren't available. At attempt to contact the buyer through Farmers National was unsuccessful.

The buyer farms land adjacent to the 80 acres, said Jayson Menke, a Farmers National agent involved in the sale.

The 80 acres was described in Farmers National promotional material "as some of the absolute best cropland in the Red River Valley" and is used to grow sugar beets and potatoes. It's located 2.5 miles northwest of Veseleyville and 6.5 miles southeast of Park River.

Beets and potatoes, though generally more labor-intensive and costlier to grow than most other crops, typically have greater profit potential than the other crops. So, land on which sugar beets and potatoes are grown normally is more valuable than land on which other crops are raised.

The high cost of seed, fuel, chemicals and other crop inputs also make top-quality land more attractive to farmers, Swenson said.

By planting on high-quality land, farmers improve the odds that the expensive inputs will produce a good crop, he said.

Menke said the 80-acre parcel was owned by several family members who decided this was a good time to sell.

Another parcel of Walsh County farmland, this one consisting of 86.67 acres, sold for $7,834 per tillable acre. This tract is 9 miles west of Grafton, 5.5 miles east of Park River and on the south side of Walsh County Highway 17.

Sugar beets and potatoes also are grown on this parcel. But a coulee cuts through the land, making it more difficult to farm, Menke said.

Farmland sales are strong

Cropland sales in the region are unusually brisk this fall, according to Longtin and others.

That's partly because a potential increase next year in the capital gains tax encourages some landowners to sell before year's end, Longtin said.

Though the supply of farmland available for sale has grown, demand for farmland is so strong that prices for it continue to rise, Swenson said.

Farmland prices in the state have been rising for several years.

North Dakota farmland values rose an average of 14 percent in 2011, according to a survey by the North Dakota Chapter of the American Society of Farm Managers and Rural Appraisers.

In Walsh County, the average value of nonirrigated farmland has tripled since 2002, according to a survey early this year by the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture.

Experts cite several reasons for the ongoing rise in farmland prices.

•Crop prices remain strong. High corn prices, in particular, are pushing up the value of farmland.

•Farmers in the Red River Valley generally harvested average or above crops this year despite the drought that hammered the U.S. Corn Belt.

•Federal crop insurance provides a safety net for producers when economic times turn tough.

•Agricultural economics encourage farmers to increase the size of their operations, particularly when a younger family member joins the operation full time.

•The rate of return on competing investments such as CDs is extremely low. That causes some farmers to buy land with money that otherwise would be invested differently.

&ull;Low interest rates reduce the cost of borrowing money to buy land.

A replay of the 1970s?

Longtin and others say farmers' willingness to pay high prices for farmland hasn't been this strong since crop prices soared for several years in the 1970s.

In the early 1980s, however, crop prices and farm profitability plunged. Many farmers who had borrowed money at high intrest rates to buy land were hurt badly.

Some people involved in area agriculture wonder if that boom-to-bust cycle is being replayed now.

"Are in another bubble like the 1970s?," Swenson said. "The big difference this time is, a lower percentage of the money used to buy farmland is borrowed. People are using more cash to buy land. And interest rates are a lot lower today, which makes a difference, too."

Nonetheless, "These are heady times. It will be very interesting to see how it all plays out," Swenson said.