Colorado Farm Land Becoming a Precious Commodity
The State of Colorado is well known for its vast stretches of prairie and lush mountain valleys. For years, farmers have sought out Colorado farm land as an ideal place for growing crops and raising a variety of animals such as chickens, pigs and cattle. However, due to the recent rise in rural development areas, farm land in Colorado has begun to disappear at a steadily increasing rate.
By the year 1997, Colorado non-federal lands encompassed approximately 25.79 million acres, 80% of which were dedicated to private farms and ranches. Grazing lands on farms and ranches represented 19.9 million of those acres. Since 1992, nearly 2.89 million acres of Colorado farm land have been lost to development. A weakening agricultural economy has also played a part, making the farm land that is still in operation that much more valuable. With an estimated 690 acres of Colorado farm land being lost per day, the state appears to be looking at an endangered future for farming land.
Not all areas in Colorado have been experiencing a loss of farm land, though. Areas such as the Arkansas River basin and the adjacent counties of Pueblo and Los Animas have all experienced an increase in farm and ranch land. While these areas have been fortunate enough to see a rise, areas on the eastern plains have not been as fortunate. The counties of Cheyenne, Lincoln and Kit Carson have lost a combined total of 400,000 acres, while Weld County, known as the nation’s fifth largest grossing county in agricultural sales has lost 271,491 acres of land. It is estimated that by the year 2022, Colorado farm land will have decreased by more than 3.1 million acres and that nearly 3 million of those acres of rural land will have been developed before 2030.
Reasons for the loss of land are not simply limited to rural development. With rising economic pressures, many farm land owners are finding themselves being forced to sell valuable land because they can no longer afford to run a farming operation. In addition, many families with farm land for sale in Colorado are seeing future family members choosing occupations outside of the family farming business, leaving no one to operate the family farms.
The loss of farm land in Colorado also seems to contribute to the loss of economic growth in rural areas and may hamper towns from creating wealth locally. One positive aspect of the declining number of acres of farm land in Colorado is that with numbers dropping, the farm land that remains has become a very valuable commodity. Investors have begun seeking out Colorado farms for sale as a prime candidate for their investment dollars. As the future of the nation’s agricultural economy fluctuates, so does the price of this valuable land.
Although some farmers are cashing in on the rise in land value, others are partnering with investors to increase crop production. With the help of investor backing, some farmers are also able to venture more into organic crop growth, an increasingly popular trend not just in Colorado but in many other states as well. As awareness grows across the country regarding organically grown produce, demand for organic farms is also on the rise. Many farmers in Colorado are now applying for state and federal funded grants to upgrade their operations in order to keep up with the demand for organic produce.
For the sake of clarity, we will make the distinction between farms and ranches as follows. Farms are properties that generate income primarily through the production and sale of agricultural products such as corn, soy beans and alfalfa. A working ranch, we will define as a property that’s primary income production is from the sale of cattle. Many of these working ranches grow some hay to supplement winter feeding and may sell any surplus hay.
In these times of financial uncertainty, many investors are looking for alternatives that minimize risk and produce an acceptable return.
While commodity prices fluctuate regularly, a farm, when purchased right and managed well, can provide a regular income with an acceptable return. The secondary benefit from this type of investment is long term appreciation potential. According to the USDA bulletin of February 2009 farm land values in Colorado increased 51% from 2004 -2008.
The fundamentals of a farm land investment are sound and presently represent one of the best investment opportunities for those individuals looking for a balanced portfolio.
So, what factors and trends make buying and operating farm land such a good idea?
Here are a few key points that will help clarify:
- As mentioned before, farm land has a history of long term appreciation.
- Income Generation. A good, well managed farm can generate for its owner returns ranging from 5-8%. This can be achieved even as an absentee owner.
- Worldwide population growth combined with a decline in agricultural acreage from development has created a world per capita shortage of farm land. In 1960 there was approximately 1.2 acres of farmland per person worldwide. By 2000 it had dropped to just over ½ acres.
- Advancements in technology, both in bioengineering as well as mechanical engineering continue to assist in operational efficiencies and margin improvement
Buying farmland does not mean that you have to abandon your day job and learn how to operate a tractor. In fact, that probably would not be the most efficient method to start with. One can start with a fairly small operation and hire a local operator to do the heavy lifting. There is no shortage of operators out there that are looking for more farmland to work.
At Colorado Ranch Sales we understand the elements involved in making sound agricultural purchase decisions and can assist you in locating and buying a farm that fits you specific needs. Please Contact Us to further discuss how buying a farm would work for you.
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