The increasing value of land is making it financially harder than ever for farmers trying to survive bad crop years or farmers trying to get into the business. Historically, real estate prices in the South have been tied to returns from row- crop agriculture, but with the South's economic diversification and urbanization, agriculture is just one of many factors influencing land values. With fewer acres available for farming, prices are rising even on less fertile farmland. Increases in land prices mean the cost of using land for row-crop production goes up since farmers forgo the returns they could get from selling the land and investing the proceeds in other ways.
Farmers often own equipment and other assets specific to row-crop production.
This equipment has relatively low resale value, so farmers tend to postpone farmland to urban uses. Hite says if farmers are getting less than 4 percent return on their land, they're working for free and probably losing money. If they sold their land today and put the money in a certificate of deposit they could get at least a 4 percent return, maybe better. Crop budgets are a helpful planning tools for crop selection, marketing, financial management and as a control mechanism. They are a cost and return method on a per acre basis for the particular soil, region and the cultural practice system used.