This is a tale of a glass either half-full or half-empty, depending on your point of view, and how it might affect the future of agriculture. It is the matter of values of farmland real estate. They are going up, and in a big way. According to U.S.D.A. Chief Economist Keith Collins, the average rise of increase in farm real estate values in the U.S. averaged four per cent a year in the 1990's. In 2004, that figure shot through the roof.
COLLINS: We saw a phenomenal increase. An eleven per cent increase in U.S. farm real estate values. And that reflected the record farm incomes that we saw. It also reflected the extraordinarily low interest rates. We also had the influence of the tremendous boom in non farm real estate values bleeding over into the farm economy.
And there is no end in sight in rising farm real estate values for 2005.
COLLINS: Once again, even though interest rates are rising, we still think that long term interest rates will be low enough to continue to propel the increase in farm real estate values that we've been seeing. And once again with net cash farm income being near record high, we're forecasting that farm real estate values in 2005 will go up about seven and a half per cent. Down from last year, but still well above the long term average for farm real estate.
Now while current farm landowners are reaping the benefits in the form of increased asset values and equity, to borrow a phrase being used in the U.S.D.A. Farm Bill Forums, there is an unintended consequence.
COLLINS: For the forty per cent of agricultural land that is rented, this will mean higher cash rents for people who have to rent. And for new entrances and beginning farmers into agriculture, it becomes a barrier.
And that concern is being echoed across the nation by many participants of the U.S.D.A. Farm Bill Forum series, such as this woman.
PARTICIPANT: Land values, especially those in productive areas that are under development pressure, are escalating at a pace that is having a profound impact on beginning farmers' ability to purchase land.
And U.S.D.A. Secretary Mike Johanns agrees that something needs to be done in crafting the next Farm Bill in a way that minimizes if not eliminates the barrier of higher farm values keeping those interested in becoming farmers and producers out.
JOHANNS: It would be terribly unfortunate if twenty years from now, all of our young people were employees of absentee owners, or cash renting from absentee owners. I believe there's huge value in ownership of farm land.