Madison County Democrat. (London, Ohio) 19??-1958, 1950-06-30
Prices Decline
On Farm Land
Broadcast by CIaudel. Hummel,
agricultural Specialist, Federal
HNSerNe Rank nf CIeuAlana

Reserve Bank OF Cleveland
Farm land prices in the Fourth
District have declined about 4
percent from the postwar peak
in 1949 when the average price
per acre of farm land i'm the Dis
trict was lao percent above the
prewar (1935-9) average.
g Among the four Fourth District
states, the greatest postwar in
crease in farm land values oc.
Cured in Kentucky where by
March 1949 prices had risen to
nearly three times the prewar
level. In Ohio the postwar peak
was only about 25a times the pre-
war base, while in Pennsylvania
and West Virginia the highest
point was slightly less than twice
the prewar level.
Despite the downward trend in
prices which have occurred i'm
most states the land market has
been characterized by much more
firTnness in values than was the
case following World War /. Scv-
eral stabilizing factors might be
mentioned. One of the most inn
portant is that farm commodity
prices have not been subjected to
a PRESCRIPTIONS drop such as oc-
Cured in 1921. As a result net
farm income last year was only
about fifth less than in the peak
year of 1947 whereas net farm in
come three years after the 1919
peak had declined by more than
so percent. Export demand aris-
ing from the foreign aid program
and price supports have provided a
prop under farm prices which did
not exist i'm the earlier period.
Another factor is that farmers
generally are in a strong finan-
cial position. The current farm
mortgage debt is only about one
half as large as it was five years
after the closeof World War I.
Furthermore. current liquid as
set holdings of farmers are es-
timated to be practically double
their aggregate long and short
term debt obligations. This is a
sharp cotrast to the early 'Twent
les when much short term debt
was being refinanced as mort
gage debt.
The desire on the parI of urban
workers to live on a Iarm has
also exerted an important in
fluence on land prices particul-
arly in areas adjacent to indust-
trial centers. 1t is significant in
this connection that the recent
census has revealed a marked in
crease in population of many
rural areas in contrast to small
er rate of growth in long-establish-
ed population centers. Urban
workers are often willing to pay
more for a small farm to be used
as a rural residence and operated
on a part-time basis, than would
an individual planning to devote
full time farming. For that reas-
on farm areas adjacent to urban
denters have not reflected the de-
Cline in land-values that is reported
in areas that are more remotely
located.
So much for the sustaining in
fluences on land prices. What
about some of the opposing factors
that tend to limit the demand for
farm land? The postwar decline
in prices of farm products from
the 1948 peak probably has had
a somewhat restraining influence
on the prices paid for farm land.
However, as previously pointed
out net farm income in 1949 was
relatively favorable In fact the
net income from farming in that
year was in EXCESS of any year
prior to 1916, and if preliminary
estimates are realized, net farm
incomes this year still may be
more than two and a half times
prewar and larger than any year
prior to 1943 Granted that farm
prices and income !. are substan-
italy below the postwar high,
it seems improbable that present
price and income prospects will
serve as serious depressant of
land values this year.
The fact that an Increasing pro-
portion of buyers are employing
credit to finance their purchases
likewise may have restraining
influence on land prices. Lenders
will desire to be assured that the
purchase price is in accord with
probable returns from the land.
Purchasers of more than three
fifths of the farms sold last
year are reported to have restored
to- credit financing. This is in con-
trast with only a year and half
ago when approximately one half
of the farm land transfers were
for cash. Moreover, the amount
Of money added to equip and
stocka modern farm also serves as
restraint on the price as pros
Ipective buyer will bid for farm
land. Widespread mecharfization
and other technical developments
in farming in the past ten years
have added measurably to the
farmers capital requirements. 1t