Agriculture land in rural Canyon County is becoming too expensive to farm.
That’s a problem, because agriculture contributes $3 billion to Idaho’s economy, making up 5 percent of the total state gross domestic product. In fact, Idaho ranks No. 4 in the U.S. for reliance on agriculture as percentage of its gross domestic product, according to Celia Gould, director of agriculture.
But with land prices rising, land is at risk of being used for other purposes, such as housing.
“Especially here in the Treasure Valley, land prices are going up drastically,” said Mary Hasenoehrl, the grower representative for the Idaho Potato Commission, at the Agriculture in Idaho breakfast series on April 3. “For the farmer to be competitive, he has to buy or rent that land at a higher price.”
For the moment, Canyon County hasn’t lost any farmland. In fact, the amount of land reported to the Idaho Tax Commission as qualifying for the agriculture exemption in Canyon County has actually gone up by 3,000 acres, said Patricia Nilsson, development services director for Canyon County, in Caldwell.
But there have been some close calls. “It’s a myth that we’ve lost significant farmland, but we dodged a bullet ten years ago” before the recession slowed development down, Nilsson said. The county has Idaho’s third-largest city, and is next door to the state’s most populous county, which is knocking on its doors as land and housing prices go up there.
Part of the issue now is that institutional investors, such as churches, pension funds, and insurance companies, have for the past decade or so been investing in agricultural land, either directly or through farmland real estate investment trusts. “Our family recently lost a chunk of land because the institutional money was willing to pay a lot more for it then we could afford as farmers to pay for it,” Hasenoehrl said.
One example of such an investor is Farmland Reserve Inc., a nonprofit organization in Salt Lake City and an investment arm of the Church of Jesus Christ of Latter-Day Saints. The organization, said to own tens of thousands of acres of farmland in states such as Nebraska and Florida., has purchased 21 parcels, totaling 1,175.17 acres, in Canyon County, Nilsson said. Farmland Reserve would not comment.
“Over the last five years, we saw an influx of institutional investors,” said Jon Maughan, managing director of the midmountain region for Rabo AgriFinance, a subsidiary of Rabo Bank, which has $2.1 billion of agriculture loan assets in the region. Because the stock market had been fairly flat for four or five years, without a lot of alternative investments, institutional investors were investing in farmland.
Such investors would buy the land and then rent it back to the farmers who sold it to them, but they wanted a 5 percent return on their investment. A typical rent of $500 an acre would be tough for the farmer to pay and still be able to make a living on agriculture. In response, some investors are going down
to 4 percent. “I don’t think they’ll go any lower,” Maughan said. In fact, the low return is driving institutional investors elsewhere, he said. “With the stock market going up and the economy doing well, the institutional investor has other opportunities,” he said.
Another issue making agriculture tough is that farmers looking to expand into the burgeoning agritourism market are running into problems working with regulatory agencies, Nilsson said. When a farmer wants to add a winery, for example, transportation agencies don’t know how to determine traffic counts for that type of operation, and sometimes call for expensive traffic impact studies that aren’t warranted, she said.
“Their only frame of reference is something huge like St. Chapelle, with concerts,” Nilsson said. “Most of them are pretty small operations – Friday afternoons and Saturday and Sunday.” She is working with transportation agencies to develop thresholds where the agritourism operations have to develop mitigation plans only if those limits are exceeded, she said. “They’re not developers, they’re farmers,” she said. “They don’t know what a transportation impact study is, except that it sounds expensive.”r