Market cools for farmland, but prices still rising
Source: Baltimore Sun, by Ted Shelsby
August 26, 2007
The recent slump in Maryland home sales has slowed, but not stopped, the rising value of farmland in the state.
According to a recent survey by the USDA, Maryland retained its position as having the sixth-most-expensive farmland in the nation. The average price of an acre of farmland here, including buildings, is up 3.9 percent from last year to $9,250 an acre.
Driven by what was one of the hottest real estate development markets in the country in recent years, farmland prices here had been increasing at a rate nearly double the national average.
But that was not the case this year. The 3.9 percent increase in the price here compared with an average gain of 13.7 percent for farmland throughout the contiguous 48 states.
Maryland farmland values rose 12.7 percent in 2006, on the heels of a 38.6 percent jump in 2005.
Despite this year's more modest gain, the cost of farmland remains still the biggest threat to agriculture in Maryland, said state Agriculture Secretary Roger L. Richardson.
"It is almost impossible for young people to buy the land needed to go into farming anymore," he said. "Prices are too high."
The U.S. Department of Agriculture survey was based on farmland sold as farmland. There is little of that happening in Maryland, agriculture officials say. Most farmland is sold for residential development.
Some farmers with operations close to the Baltimore or Washington metropolitan areas are being offered as much as $400,000 for development lots, Richardson said.
"In Howard County, farmland preservation is going to the wayside," the secretary said. "Values are so high and increasing so fast the state can't afford to preserve the land."
John E. Kortecamp, executive director of the Home Builders Association of Maryland, said lots in Howard County have recently sold for $400,000 and $450,000.
"There is only so much land," Richardson said. "The more that goes into development or is black-topped, the less there is for farming."
High land values also are changing the face of agriculture in Maryland. James C. Hanson, an agriculture economist with the University of Maryland, College Park, said it forces farmers to move into high value production, such as poultry farms and greenhouse/nursery operations.
"Farmers need to be in operations where they can make the highest profit per acre of land," Hanson said. "Grain farmers can't afford to buy land. It does not produce enough revenue to cover the cost of the land."
Development lots in rural sections of Harford County have recently sold for $240,000. On the outskirts of Westminster, 1- to 2-acre lots are bringing $180,000 to $220,000, said Ralph Robertson, with the Maryland Agricultural Land Preservation Foundation.
"Prices have leveled off recently," he said. "But over the past 3 1/2 years, prices have jumped about 40 percent."
One of the few pluses of rising land costs is experienced by farmers nearing the end of their careers, Richardson said.
"If you are looking at retirement and ready to cash out - and I hate to see that happen - a farmer can benefit from the high price of his land," he said.
Development pressures from Philadelphia and beyond are having an impact on farms on Maryland's Eastern Shore, the secretary said.
"I've seen cases where people in the Baltimore and Philadelphia area have sold their homes for $800,000, come down to the lower Eastern Shore, build something comparable for $400,000 and bank the rest," Richardson said.
Maryland trails Rhode Island, Massachusetts, Connecticut, New Jersey and Delaware in cost of farmland. Rhode Island leads the nation, with land valued at $12,500 an acre.
Massachusetts has the second-most expensive farmland at $11,800, followed by Connecticut ($11,700), New Jersey ($11,300), and Delaware ($10,400).
The average price for the 48 contiguous states is $2,160 per acre. This is a record high and a gain of $260 since last year, according to the USDA.
In neighboring Pennsylvania, the price is $5,670, up 18.4 percent from last year. The price rose 16.3 percent in Virginia this year to $5,700.
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