A rise in the price of corn, beets and beans combined with low interest rates to fuel a surge in Michigan farmland values, state assessment records show. Since 2008, agricultural land was the only class of real estate in Michigan to grow value beyond pre-recession levels and the total value of farmland across the state now exceeds the total value of industrial property.
Source: Michigan Department of Treasury
Michigan farmers may be getting older and fewer in number. But for those who have held onto their farmland, the past few years have been fruitful, indeed.
Agricultural properties across Michigan have risen 11 percent in value since 2008, the only property sector in the state to post overall gains (when adjusted for inflation) since the Great Recession.
And most farmers can thank the price of corn and sugar.
“The commodity prices went up,” said Nancy Heck, treasurer and assessor of Windsor Township in Huron County in the Thumb, and farmers “had money to spend.”
Increases over the past five years led to big paychecks for farmers. They in turn poured money into acquiring more farmland and pushed per-acre costs up markedly, Heck said. Agricultural land values rose when corn prices doubled and were pushing $8 a bushel (it’s now back around $3.50).
Across Huron, Tuscola and Gratiot counties, located in the Thumb and in the middle of the lower peninsula, land values soared from 2008 to 2016, making municipalities there some of the few in the state to see overall real estate values climb. In Heck’s township, agricultural land values more than doubled ‒ from $84 million to more than $201 million over those four years ‒ after adjusting for inflation, a 140-percent increase.
Farmland in south-central Michigan, close to the Ohio border, also pushed overall values above 2008 levels.
Farm properties jumped in value when the price of corn, sugar beets and soybeans doubled in recent years. And though commodity prices have retreated in the last couple of years, the value of the good farmland remains high.
Property values project
This two-part project on Michigan property values is one in an occasional series of news collaborations between Bridge Magazine and Crain’s Detroit Business. Other stories:
“The issue right now is we’re coming off three years of real high commodity prices … and that fueled the increase in the price of land,” said Eric Wittenberg, a farmer and an agriculture economist at Michigan State University.
He said farmers were flush with money from the bumper crops and wanted to expand their holdings. “Guys were buying land with cash. They were making damn good profits,” Wittenberg said.
Also contributing to the higher prices were low interest rates and the pressure from local dairy operations, which bought land to spread the manure from their herds. The manure would eventually be turned into fertilizer and either used or sold, Wittenberg said.
The increase in Tuscola, Gratiot and Huron counties also occurred where the largest wind farms in Michigan have been built. Utility companies pay property owners annual fees to install and operate the wind turbines, often $10,000 or more per turbine per year.
Wittenberg and Heck said they don’t believe the wind farms triggered the increase in land values. Heck noted that townships with no wind farms in Huron County also saw steep increases in farm property values.
But the wind turbines did help by expanding the tax base. Heck said the local library, upon whose board she sits, got a big boost in new property tax revenue from one of the turbine companies – money that allowed it to remodel the building and stay open two extra days a week.
“When I first got on (the board) we didn’t know how they were going to replace the roof,” she said. Now, that’s solved. “We’ve remodeled the whole place.”