The Rising Cost of Land

"Portrait of a Lonely Barn" - Bates City, Missouri

 

We've talked before about the rising cost of milk.  But I guess I didn't realize how much of an effect the economy has had on the price of good, arable land.

J. and I headed to an auction this morning in Bates City, which is a good 30+ minutes to the east of Kansas City down I-70.  When we took the exit and immediately found ourselves looking at the snow retreating from fields full of dirt black as coal, I took a deep breath and relaxed.  It felt like home.  It smelled like Spring. 

Sometimes we know the stories behind estate auctions but this one wasn't the usual run-down-family-farm-with-a-paintless-barn-that-is-barely-standing-after-the-old-farmer-passed-and-no-wanted-to-follow-in-his-footsteps story.  The brick house with its 3 garages looked brand new and it sat on 41 acres with nice-sized new barn and a second tract of 20+ acres for sale separately.  In the living room was a whiteboard that showed the bids on the house and the 2nd tract.  Someone bought them both for $535,000.  I marveled to J. that it seemed like a really high price. 

Then we walked down to the barn to look at the 2005 John Deere 5103 tractor and Gator that they were selling.  Both went high - the tractor sold for $12,000 and it didn't have a loader like mine.  Knowing that it would be $6 - 7K to add the loader, I feel good about paying $15,000 for mine last year with the loader.  I s'pose it always feels good to think you got a good deal.

And that got me to thinking about our farmland.  We bought it over a decade ago and paid $72,000 for 40 acres with a brand new 30' x 40' Cleary building on it.  I'd say the going price to have that barn built was $10,000; maybe $12,000 with the concrete work and clearing.  Doing the math, that's $1,500 per acre.  We scrimped and saved to pay for it and the mortgage on our house, but it was a labor of love.

But this auction?  If we say the house was worth a generous $250,000, that land sold for somewhere around $5,000 per acre.  And that got me to thinking some more.  So I did some looking at UnitedCountry and LandsOfAmerica and was dumbstruck to see a farm just down the road for us selling for over $4,000 per acre.  Holy crow!  We could sell and make a tidy little profit if we were so inclined.

Courtesy of Univesity of Missouri Extension. Our area had the highest increase!

 

When I told J. what I had found, his reply was "Well, unlike the dollar bill, you can't make more of it.".  Yuuuuuuup, he's right.  Land is a hedge against a devaluing dollar and a world gone mad.  In fact, over the last 100 years investment in farmland has only experience three brief periods of negative returns (1930s, 1980s, and 2008).

Am I selling?  No way, Mr. Auctioneer.  No way.

I've shared this post with this week's Weekly Top Shot. If you want to see some awesome photography, that's the place to be!