SIOUX FALLS, S.D. (KELO) — The price of everything is on the rise, but for many farmers and ranchers across KELOLAND, the cost of farmland is rising so rapidly, its preventing some from growing or breaking into the market.
In tonight’s Your Money Matters, we show you the new local option to help compete with rising land prices and competition.
“In the last few years, ag land prices have really escalated,” Scott VanderWal, the president of the South Dakota Farm Bureau said.
SDSU’s 2022 Farm Real Estate Survey revealed a statewide average of nearly $5,000 an acre for cropland, up 27 percent from 2021. But some highly-sought after regions saw even bigger increases.
“Now you hear very commonly sales in the $11,500 to $12,500 range,” VanderWal said.
“We saw some transactions here at the end of last year in southwest Minnesota where farmers paid as much as $15,000 or $16,000 an acre,” Daniel English, the General manager of FBN Finance said.
Estimates for 2023 Farmland Values from the Farmers Business Network show cropland will see a 48 percent increase in value across South Dakota. Industry experts say the increase is in part due to grain prices at record highs, giving farmers an incentive to grow their operations.
“There’s competition from other farmers that are well established that have made some money over the years that are able to buy the land either by paying cash for it or being able to borrow money at fairly decent interest rates,” VanderWal said.
Investors from outside the ag world are also joining the competition for land auctions, making it hard for new and smaller farmers to compete.
“If you’re a smaller farmer, a farmer that’s looking to grow, a lot of times you may not have the cash on hand to immediately close on a purchase,” English said.
It’s why the Farmers Business Network just added a new bridge loan option, designed to help those farmers better compete for cropland.
“This allows you to go in and act like a cash buyer at an auction, compete against bigger players, compete against outside investors, and be able to win that auction and actually close and buy the parcel of land,” English said.
“That’s what its all about to have that land base. But certainly if you don’t have equity to start with it’s fairly difficult,” VanderWal said.
The increase land costs come at a time when many farming expenses are also rising.
“The cost of inputs are going up, rates are going up, so to be able to manage profitably, you really have to be able to compete both on the financing side, as well as the traditional grain marketing side,” English said.
FBN recently polled nearly 4,000 farmers across the country, only 33 percent of South Dakota farmers want to buy farmland; 52 percent said they’re not interested in buying right now because prices are too high.
“Where land prices are now there’s no way it ever prices out. You have to subsidize it with something else, that leads into struggles and challenges of beginning farmers because farming in general is so capital intensive, whether you’re talking about equipment which has really escalate the last couple of years,” VanderWal said.