Efficient farming can be practiced in many ways, but one method that has become more popular in recent years is the use of cover crops. The quality of the soil has a direct impact on the health of the farm and its output, so crops that boost soil quality rather than degrading it actually add to the value of the land they are grown on. There are various kinds of cover crops which have different ecological impacts on the land, but the general idea is that rain water is held in the soil by the plants, and nitrogen from lower soil layers is drawn higher up in the soil. This way, the next crop, such as corn, can make better use of nutrients. Peas and soybeans have traditionally been used for cover crop purposes, but Minnesota farmer Dean Schuette took part in a trial using tillage radish as a cover crop in November 2011. The goal is to see if this increases the corn yield in 2012, but early results from the mix of radish and an oat-pea mix have already yielded radishes that are larger than normal.

Researchers say that deep-rooted cover crops work best in drawing up the nitrogen, as do mustard crops. The effectiveness of using a cover crop is dependent on the species of crop; different plants grow roots at different speeds and which extend to different depths. Planting dates matter too, because most plant roots will grow longer over time. This is crucial in selecting the type of plant depending on the type of winter expected for a certain region. Even if plants die the nitrogen can still be left at higher level in the soil for the next crop. Oats and oilseed radish usually leak their nitrogen storage quicker than other plants so that it is there when the next crop is established. With other cover crops, such as rye, the timing of nitrogen release can be unpredictable.

In Iowa, a trial using rye cover crops has been taking place for the last couple of years. Farmer Arliss Nielson planted hairy vetch and sweet clover, both along with winter rye, over 350 acres. The rye was seeded into the corn crop by airplane in September 2010, and the corn stalks the following season seemed to be more protected, even though the vetch and clover didn’t survive the winter. Nielson plans to continue participation in the project, while other farmers have considered being involved as part of a cost-sharing program called the Boone River Watershed Mississippi River Basin Initiative.

Cold temperatures eventually kill many cover crops. Radish, for example, often dies off in late fall, but rye can capture some of the nitrogen released by the plant matter. Combinations of cover crops, therefore, have been seen as beneficial. Other projects, such as one in Ontario, Canada, used cover crops and manure following a wheat harvest in 2003. Cover crops were planted after an early harvest of a vegetable crop; both studies are just a couple of examples of how farmers have looked at cover crops and continue to do so. The effectiveness of various methods is still being studied to find the most effective ways to protect main crops as well as make them more lucrative.

Sources:

AgriNews (http://www.agrinews.com/cover/crop/trial/tries/tillage/radish/story-4047.html)

 AgriNews (http://www.agrinews.com/farmers/are/giving/cover/crops/a/try/story-3472.html)

 Eastern Ontario AgriNews (http://www.agrinewsinteractive.com/archives/article-5504.htm)

Depending on which side of the table they are on, farmers will talk differently about U.S. agricultural policy. Those that see profit argue for subsidies and the volatile market for crops and commodities. Others struggle to make ends meet and advocate change in the subsidy structure and the market that encourages overproduction. For investors, times have never been better for buying up farmland, with interest rates at historic lows. Land values are now increasing at up to 8% per year, while commodity prices being as high as they are making investing in farmland very lucrative. All of this in a time where economic troubles persist and when traditional investments, particularly money market investments on Wall Street, are considered too risky.

Crops are also attributing to the situation. The high prices of corn and soybean are yielding support for investors because they raise the value of the land, and are expect to do so into 2012. Department of Agriculture experts see no reason why this won’t hold up. Economist Scott Stiles with the University of Arkansas Division of Agriculture said high commodity prices, along with low interest rates for loans, real estate, and equipment are favorable for investors. The demand for crude oil in farm operations is not much of a concern, since prices have dropped with economic woes, although daily supplies like seed and fertilizer remain high in cost along with soybeans and corn.

Like other markets that have sustained a boom for periods of time, like the housing market, other experts worry that the farmland market could go bust at some point. The housing bubble burst and wrecked havoc on the real estate market. At the same time, low mortgage rates are helping investors as they buy up farmland. Borrowing costs have helped as well, with an average rate of 5.8% on variable-rate mortgage loans for farmland between April and June 2011. Heartland rates were the lowest, while mortgage rates were higher in areas affected by drought like Oklahoma and Texas. Reasonable rates across the board have allowed more buyers to seek out farmland as the situation has been favorable for more investors to afford it.

What few people outside the farming industry realize is that there is a volatile economic market in play. Investors have caught on quickly and have bought up a significant portion of Midwest farmland, which could prove valuable as they cash in down the road. While other markets recover from the recession, agriculture remains a place to put their money in, but how long the bubble continues to expand is anyone’s guess. The low interest rates and high land prices favor investment deals. Whether another bubble burst in the future is uncertain, but hopefully by then the housing market, equity markets, and other targets of investment will be lucrative once again. For now, many investors continue to keep their eye on the farm and are doing quite well this way.

Sources:

Delta Farm Press (http://deltafarmpress.com/markets/low-interest-rates-and-farmland)

 Farmland Investor Center (http://www.farmlandinvestorcenter.com/farmland-power-menu/landowner-resources/farm-mortgage-rate-watch)

While tough economic times have affected most markets, including housing, farmland has risen in value, particularly in Illinois and other Midwestern states. Economic recovery in 2011 has been slow and many experts fear another dip in the economy and perhaps another recession. With little to put their money in, investors have seen opportunity to make gains, or at least limit losses, by putting their money into farmland. This has led to appreciable price gains in many important markets. In Illinois, for example, farmland prices per acre were up 18% year-over-year in September 2011, while this number climbed to 23% in October. There were rises in value in Indiana, Wisconsin, and Michigan as well, while Iowa had a 31% year-over-year increase in farmland value in October.

Gary Schnitkey, an agricultural economist and farm management specialist at the University of Illinois, said that farmland prices are 2.2 times what they were in 2004. The trend of falling interest rates has something to do with it. Schnitkey has also attempted to determine whether farmland prices are rising too much by using capitalized value analysis. This is the average cash rent, divided by the interest rate; future returns in value are also factored in. If these returns are high, then capitalized value increases; this trend is also supported by low interest rates.

From a historical perspective, according to Schnitkey, a similar trend occurred in the early 1980s, after which Illinois farmland prices declined for several years. Assets such as farmland are considered safe by many investors, and are perceived as favorable during times of economic instability. Experts suggest that if the economic outlook turns more stable, farmland prices may rise at a slower rate.

It is not only the state of the economy that is impacting the prices of farmland. The costs of corn and soybean have some effect, as well as the technology used to produce these crops. Economist David Oppedahl cited the fact that farmers can produce more than twice as many bushels of corn per acre than they could in the 1970s. This also makes farmland more valuable. On the worldwide market, the American dollar has weakened compared to other currencies, increasing the demand for farm products grown in the United States.

The local business climate in many farmland communities is contributing as well. Local farmers sometimes bid against each other for the same land, so many factors come together to make the situation perfect for prices to continue to rise. With many local farm economies doing well in rural areas, Oppedahl also suggests that other types of economic growth, at least on the local level, may follow. The economic success of farmland is not immune to downward trends, however. China is a growing market and imports many U.S. farm products. If its economic growth slows in combination with other geopolitical events around the world, then land values could fall. That all depends on whether the demand for products being exported by the U.S. drops, making their production less profitable. With various factors in play, even experts are unsure whether the persistent rise in farmland prices in Illinois and other states will continue, or if the trend will moderate or even reverse in the future.

Sources:

University of Illinois (http://web.extension.illinois.edu/bdo/news/news26092.html)

 Quad City Times (http://qctimes.com/news/local/farmland-values-in-iowa-illinois-skyrocket/article_fbd83fe2-2484-11e1-8115-0019bb2963f4.html)

Flooding on the Missouri River in the summer of 2011 severely affected corn and soybean production, as well as inflicting infrastructure damage on the roads used to carry the crops. Crop losses were total for many farmers, which could force many farming businesses to fold, creating a burden on an already struggling economy. Many crops were underwater for more than a month in the Missouri River Valley. This long-term loss of access to the land for any purposes may make recovery impossible for some farmers. There are some policy and economic factors that may mitigate some losses; some farmers have insurance on either their crops or their income for the year that may cover the losses. Agricultural operators can also terminate their rental contracts if the land is not salvageable for use during the following year. Land owners, farmers, and operators have spent the summer and fall making the determination of which plots are salvageable at all for production in the next few years. Some farms and farmers will be luckier than others, but overall, recovering from such a catastrophe will most likely take years.

What kind of insurance was available for farmers affected by the floods? The typical crop insurance policy in Iowa covers 75% to 80% of a producer’s land, so with a total loss, the farmer will have losses of up to 25% of the total crop. There are also Revenue Protection policies which insure up to 90% of the acreage in Iowa, according to economist William Edwards. These policies provide a price guarantee if commodity prices rise anytime between February and October, and (more relevant to the flood losses), insured farmers get $1 per bushel of corn and $0.25 per bushel of soybeans in the case of a loss. The state agricultural department has also put in place some relief policies for those whose land was wiped out; the savings from these initiatives come to about $20 per acre for soybeans and $70 per acre for corn. Land owners and farmers, therefore, have financial options even if the bulk of their crop revenue has been lost. All of the effects of the flooding probably won’t be known for months, even after the waters return to normal levels. Nature does not follow insurance company schedules, so renters and owners of farmland may be left with additional dilemmas as they recover.

Insurance coverage and state policies can help, but economists like Edwards also say net revenues are still going to be down for the year. Even farmers with 80% insurance coverage on their operation could see total revenues drop by $100 per acre. Some producers may be lucky if they were able to plant on land that wasn’t flooded and get in a late crop, but the flooding was unprecedented in scope. Many farmers have no idea what it will take to bring their land back into full production. Although the valley bottoms are naturally long since dried out, whole farms need massive soil reworking to be viable places to plant again. Debris had to be removed, while eroded areas had to be leveled out and soil re-fertilized to start planting.

Responsibility for repairing flood damaged farms falls to the landowners. However, smart landowners will be using these fallow winter months to work with their rental farmers – the farmers have the heavy equipment and the know-how of how to use it. Some economists have suggested that non-farming owners and their tenant farmers should work out long-term leases on the land to give the farmers a personal incentive to get it back into production, and extend discounts on land rentals for 2012 so that the farmer who does the cleanup will reap the benefit. Both owners and renters can benefit if they work together to get farms back into production.

Sources:

Iowa State University (http://www.extension.iastate.edu/agdm/articles/edwards/EdwAug11.html)

 Trucking info (http://www.truckinginfo.com/news/news-detail.asp?news_id=75178)