Farmland prices in Michigan have never been higher.
A recent farmland sale sent shock waves through the central Michigan farming community. The rise in prices are making it difficult for young farmers to improve upon their family farms as larger operations continue to expand.
Gratiot County is considered the holy grail of farmland in central Michigan. And in late February, John Pavlik made a sale he thought would never happen on 40 acres of farmland.
"It was not a big farm," said Pavlik, who owns Pavlik Auction and Real Estate in Alma.
"It was perfect park hill dirt from one end to the next. Super well tiled, I mean, it just had the makings of a great sale," said Pavlik.
And even though this was a small piece of land, Pavlik thought it was going to sell for roughly $12,000 an acre. For those who don’t know, that’s high, even in a seller’s market.
"And that 40 acres ended up at $700,000, which was $17,500 an acre. Absolutely all-time record for Gratiot County, central Michigan and most likely for the state as far as apples-to-apples agricultural farm ground," said Pavlik.
WCMU wasn’t able to confirm if this was a state record, however, according to the Gratiot County Equalization Department, this was the largest sale of farmland in the past two years, which means it’s most likely a county record.
Pavlik mentioned he was as surprised as everyone else when the sale was final.
"People kind of gasped as the price got to that," said Pavlik.
As shocking as this sale was in the farming community, economists saw this coming.
But as prices continue to rise across Michigan, it’s becoming more difficult for smaller farm operations to compete and acquire land as input costs, the upfront purchases needed to harvest goods, continue to skyrocket, and larger operations are looking to expand operations.
"Yeah, I would certainly have been gasping in that crowd," said Matt Gammans, an assistant professor of agricultural food and resource economics at Michigan State University.
Gammans says the Gratiot County sale is climbing to corn belt level prices where land is going for over $20,000 an acre.
"We've seen statewide an increase of about kind of 8% in land values just over the past two years. And most of that even being just in the in the past year, we've seen that increase. And then when we look at irrigated land that's even higher looking at a value about 11%," said Gammans.
That’s a substantial jump.
According to the U.S. Department of Agriculture, in 2007, the average price of an acre of cropland was $2,530. In 2021, the national average was $4, 420. In Michigan it was over $5,000 per acre.
Remember, the Gratiot County farmland sold for $17,500 per acre. So, what factors are driving the increase?
"The two that really stand out are the really low interest rates that we saw during the pandemic," said Gammans. "So that was kind of a combination of both market factors and policy choices in terms of having the Fed keep those rates set really low as well as just really high crop prices."
Another reason demand has climbed for farmland is that farmers simply need more land to get their money back.
"We've seen a kind of a decades and decades of trends towards larger and larger farms. And I don't really see any reason to suspect that, that trend would reverse," Gammans added.
Pavlik mentioned the young farmers who are coming to his land auctions are primarily second and third generation.
But these farmers are struggling to access land, even with established family credit.
Farmers like Brevin Herner, a 20-year-old farmer and truck driver from northern Bay County. His family has been farming their land for nearly 100 years.
"I can't write checks big enough to out pay those 1,000, 2,000, 3,000 acre farms around here," said Herner.
And even with family support, Herner has struggled to find land to expand his hay business off his family farm.
But, after looking for over a year, Herner was able to rent roughly 10 acres of undeveloped land. The only reason he got it was because of a family friend.
But the land has not been farmed in decades. Herner says it needs a lot of work, which is why he was able to get it.
Without support from friends and his father, expanding his young business would be nearly impossible.
"I'm lucky enough to have what I have. But we're not a very big family farm, we're on the smaller side for sure," Herner mentioned. "I mean he can only give me so much until he's gonna start losing money, you know what I mean? And he's doing all he can because he wants nothing more than to see me and my brother succeed and take the farm to another level."
As land prices continue to rise, a young farmer like Herner, even with family farm support and some access to credit, still has to work a full-time job to support his farming venture.
And even with some acreage, the undeveloped land does not guarantee a timely yield even after years of building assets and working to make ends meet. All of this to hopefully one day have a piece of land he can call his own and continue his family’s century-farm legacy.
