Archive for October, 2011
I was talking with a local banker yesterday who has been through several up and down cycles in farm lending and ag land. My question to him was, “Do you think this is a bubble? Are prices going to crash at some point?” That seems to be the question of the hour in the news media. Housing prices continue to fall while farm land prices are rising faster than anyone can believe. Of course, he didn’t know the answer.
Our area is awash with stories of recent rent and land auctions where the land rents or sells outright for prices previously unheard of in this area. MPR reports that farm land is selling at prices that may make it difficult for farmers to turn a profit, even with record prices for corn and soybeans in recent years. I spoke with a local farmer recently, and asked him if he was in the market for more land. Even though he has potentially 15-20 years of farming in his future, he replied, “I’m not sure I’ll be farming long enough to pay back a loan at today’s land prices.”
The banker I spoke with described conditions in farming during the 70s and 80s that led to a historic farm crisis. When banks called in their loans at that time, attorneys assisted farmers with negotiating principle reduction plans or farmland swaps (give us X amount of land and we’ll leave the rest of your farm alone). We have seen today’s bankers involved in the current housing crisis extremely reluctant to participate in any sort of principle reduction. How likely would ag lenders be willing to do the same on today’s large loans if the market dropped? Recounting yearly crop yields and weather conditions, the banker went on to tell me that rising yields and prices, combined with nearly 20 years without a total crop failure in Southeastern Minnesota, have left many local farmers in good shape.
Farming has a lot of variables, many of which cannot be controlled in any reasonable way (weather?). Let’s hope those factors continue to be favorable to strong profits, so farms can keep up with rising land prices.
The New York Times reports that pig thefts are on the rise in the Midwest, especially in Minnesota and Iowa. If you’ve ever seen a hog finishing barn, you know that many large pigs live together in long housing facilities. These barns are often located away from towns, main roads, and even the farmers themselves. There are all sorts of laws about hogs, not only animal care laws, but real estate issues as well. For example, depending upon when the farmer put his barn there and how he operates the ag facility, he may or may not be liable to his neighbor for a nuisance claim arising out of the smell that naturally accompanies pigs. Or the farmer may be protected by Minnesota’s Right to Farm statute, which states that agricultural operations shall not be considered a nuisance if they meet certain criteria. Counties may even require neighbors of hog farms to sign and record an agreement indicating they know they live in an agricultural area and agree that it has smells and sounds that naturally accompany that line of work.
All of these laws have culminated to keep hog farms away from people, which means they may have inadvertently become a prime target for thieves. Hog prices are high right now. Corn prices are also high. So it’s relatively expensive to feed and grow a hog to market weight. But a thief who steals a fully -grown hog may have just found himself a tidy profit. One farmer, for example, estimated his losses at $30,000. Because non-farmers who move to the country often want peace and serenity, they can be surprised at the sounds and smells of agriculture. Farmers have responded by making their barns more automated, locating them on gravel roads, and keeping them out of yards and housing areas. Responsible farming that keeps neighbors happy. Consequently though, there are fewer watchful eyes to protect the farmer’s work.
I imagine farmers will be watching more carefully. As rural neighbors, I hope we can do the same.
As always, farmers and the law are in the news this week.
Lawmakers are debating a Farm Bill. This article in Ag Week discusses one legislator’s views on the direction the country might take with a new Farm Bill.
The Eagle Tribune reports a pig farmer in Massachusetts is fighting a recent decision to disallow his proposed piggery. Law protecting the right to farm vary across the country. Here in Minnesota, there have been many attempts to protect animal farmers from nuisance claims, including the Right to Farm Law in Statute 561.19. In many cases, though, these laws protect existing operations from new neighbors disturbed by oderrific conditions, not new operations.
South Dakota is considering cutting taxes on wind farm development, in order to better compete with neighboring states. Minnesota is home to many wind farms, and many landowners, farmers, and retired farmers appreciate the opportunity to earn a little extra money each year from their windmills. These contracts are often long-term, run with the land (that means your heirs will be bound by the terms of the contract), and heavily weighted toward protecting the developer and not the farmer. A gentle reminder: if you are considering signing a windmill contract, bring the easement and other documentation to your attorney to be sure you understand exactly what you’re signing. Too many times, clients have brought in already signed and recorded windmill easements and were disappointed to discover the terms were not very favorable to their wishes.