he market for farm land in recent times in northwest Arkansas has been influenced by several factors.
Factors Affecting Farm Land Prices
• Increasing population base
• Increasing income level
• Stable interest rates
• Weak national economy
• Increased unemployment for January 2010:
s National unemployment – 9.7 percent
s Arkansas unemployment – 8.5 percent
s Washington County, Ark., unemployment – 5.3 percent
s Benton County, Ark., unemployment – 5.8 percent
These five conditions are the primary forces why farm real estate values have stalled out and/or decreased since 2006. As a farm real estate appraiser, I analyzed the data I have collected for the last 4 years. My sales data for high quality pastureland indicates the following average values for Benton and Washington County, Ark.:
s 2006 – $5,368 per acre
s 2007 – $7,081 per acre
s 2008 – $5,037 per acre
s 2009 – $4,061 per acre
The average price per acre for high quality pastureland for 2009 indicates a decrease of 24.35 percent from 2006 to 2009 and a decrease of 42.65 percent from the peak in 2007. I expect pasture sales for 2010 to be slightly lower than in 2009 but they appear to be stabilizing.
For 2009, the highest pasture land sale I have documented high quality pastureland sold in August 2009 for $5,000 per acre. It contained about 40 acres with one-quarter mile paved highway frontage in Benton County, Arkansas with an attractive site for a rural home.
There have been fewer sales as many sellers are still holding out for the prices of 2007. I expect there will be increased sales in 2010 and 2011 as the market corrects itself and sellers adjust the sales price to what buyers are willing to pay.
There continues to be adequate demand for pastureland in the $3,000 to $4,000 range in these two counties.
Poultry Expectations
Generally, the U.S. poultry business has been under significant stress for the last 2 years, but there are some signs of a recovery for 2010. Georgia dock price for broilers for March 9, 2010, is at $0.8325/lb, down from $0.8625/lb this week last year. The weekly broiler slaughter is down by 3.21 percent from 2008 to 2009, from 170.84 million head, down to 165.4 million head.
China is increasing their per capita consumption of chicken, according to Watt Poultry, from 7.5 lbs in 1990 to 18.3 lbs in 2006, a 244 percent increase. It is hoped they will spend more money on chicken, and hopefully increase the price of U.S., exported poultry. They are the biggest buyer of chicken feet (paws) from the U.S.
Tyson Foods stock price has quadrupled, trading as low as $4.40/share at the end of 2008 to now trading over $17.
The poultry industry faces several problems: Oversupply of chicken, prices of chicken below cost of production and high corn and soybean prices in 2010.
Feed costs make up about 46 percent of broiler production cost, which now hovers between 70 to 75 cents per pound. Cash February 2010 corn is now at $3.75 per bushel, while February 2010 soybeans are at $9.67 per bushel.
A large part of this increase for corn and soybeans is the movement of U.S. corn production into ethanol production. About 11 percent of U.S. corn was used for ethanol production in 2002. Now, about 33 percent of U.S. corn production is already going into ethanol from 50 ethanol plants built in the last few years. It is projected that up to 40 percent of the U.S. corn crop could be made into ethanol by 2015. Because of this increased ethanol production, all livestock feeding operations are looking at a likelihood of a permanent shift up in the price of corn.
Greg Cheshier owns Cheshier Appraisals and Consulting in Lincoln, Ark.
