In many communities across the State of Georgia, a broad cross section of citizens share a common interest and concern about preserving farmland. Over the past 10 years in Georgia, the combination of low profitability in farming and high farmland prices sold for development have resulted in the conversion of large amounts of farmland to residential and commercial uses. For many farmers, selling their land for development is a rational and willing financial decision. Other farmers, however, would like to keep their land in farming but feel forced to sell their land for development because of low farm profitability and other problems such as conflicts with suburban neighbors. What can local communities do to help farmers who want to keep their land in agriculture? Many local citizens in Georgia communities who do not work in agriculture or own farmland support the continued existence of farming in their communities for a variety of reasons including keeping local jobs in agriculture, maintaining local fresh food supplies and protecting green space and open space provided by pastoral landscapes. What can local communities do to protect farmland for all citizens who desire to preserve these public benefits of farmland?

    Throughout the U.S., many states and local communities have implemented programs that have proven to be effective tools for preserving farmland. These tools fall into two general categories: incentives and regulations. These categories are not "either/or" tools for preserving farmland and in fact are often used in conjunction with each other to meet a community's farmland preservation goals. It is important for a community to provide the set of farmland preservation tools or options that will be effective and accepted by the community. There is no such thing as a "one size fits all" set of farmland preservation tools that is appropriate for every state and local community. The purpose of this summary of farmland preservation tools is to introduce interested individuals and communities to these tools so that they may begin the process of assessing what set of tools may be best for them.

I. Incentives

a) Tax Relief Programs

   Various tax relief programs are used in almost every state in the U.S. to encourage farmers and landowners to keep their land in agriculture. One of the most common means of tax relief is differential assessment laws. Differential assessment laws provide for agricultural land to be assessed for property tax purposes at some portion of its agricultural use value, rather than its full fair market value. For example, suppose that a 100-acre tract of agricultural land in Georgia County XYZ would be assessed for property tax purposes at $5,000 per acre according to its fair market value for a residential subdivision. Differential tax assessment would allow the county to assess this 100-acre tract at a lower value per acre based on its value in agriculture, say $2,000 per acres instead of $5,000 per acre. In Georgia, the differential assessment formula for agricultural and forest land is set by the Georgia Property Tax Division. Some states also provide direct tax relief to farmers who keep their land in agriculture in the form state income tax credits.

b) Agriculture conservation easements

   These are another means of providing incentives for farmers and landowners to keep their land in agriculture. An agriculture conservation easement represents a legal agreement between a landowner and a government agency or private organization to keep their land in agriculture. The easement is negotiated and settled upon on a voluntary basis and becomes a legal restriction on the deed to the land. The easement may be sold or donated by the landowner to the government agency or private organization such as private land trust empowered to hold and monitor the easement. The sale of agriculture conservation easements by farmers provides needed income to farmers and landowners which may enable them to continue farming and keep their land in agriculture. The price of the easement is typically based on the difference between the fair market value of the land for development vs. the value of the land in agriculture. For example, suppose again that the assessed value of a 100-acre tract of farmland in Georgia County XYZ is $5,000 per acre based on its fair market value as a residential subdivision and $2,000 per acre based on agricultural use.

   The price for the agricultural conservation easement would therefore be in the order of $3,000 per acre. The actual price of the easement may be set by a formula if a local government is the purchaser and/or by private negotiation if the purchaser is a private organization such as a private land trust. The sale of an agricultural conservation easement represents a voluntary transaction between a willing buyer and willing seller which often makes easements an attractive farmland preservation tool in terms of acceptance to a community. Funding sources for the purchase of easements include local, state and federal governments and private donations. The federal government provides funds to local communities for the purchase of agricultural conservation easements through the Farmland Protection Program (FPP) authorized under the Farm Security and Rural Investment Act of 2002 (Farm Bill). Organizations such as the American Farmland Trust provide detailed information and assistance on conservation easements, including pricing and legal information. Private landowners may also choose to donate conservation easements to obtain tax benefits. Landowners considering this option should consult a qualified tax expert or accountant to determine how the donation will affect their individual tax situation and benefits.

II. Regulations

a) Zoning

b) Land use regulations

   A number of states throughout the U.S. have enacted various regulations at the state level to encourage farmland preservation. Many states require local communities to have comprehensive land use plans. Comprehensive land use plans discourage haphazard development in counties that can ultimately make farming more difficult, such as when incompatible land uses locate near each other with the resulting conflicts between landowners who have problems with the use of neighboring properties. Most states have growth management laws and/or statewide land use regulations that place some degree of state-level restrictions over where and when certain land uses can occur at the regional and local levels. For example, state laws restrict where and when waste dumps and landfills can be established in a county. Although not common, states may enact state executive powers and order to encourage farmland preservation. For example, a state executive order may direct state agencies to minimize farmland loss when engaging in state-funded projects such a road development. States can also encourage farmland preservation in local communities through education and technical assistance in land use planning and farmland preservation tools provided by state agencies and universities. States and local communities may also apply mitigation ordinances to preserve green space and open space including farmland. A mitigation ordinance, for example, would require a developer to preserve one acre of green space or open space for every acre of green space or open space developed. Such mitigation ordinances are more typically used to preserve environmentally sensitive areas such as wetlands rather than farmland. However, a state or community could incorporate farmland preservation (e.g., prime commercially-productive or environmentally sensitive farmland) into state and local mitigation ordinances.

III. Combination of Incentives and Regulations

   In many states, a combination of incentives and regulations is used by individual communities to meet their specific and unique farmland preservation goals. One example is transferable development right (TDR) programs. TDR programs aimed at preserving farmland allow willing private landowners to sell development rights to their farmland to willing buyers who will use the rights to increase the density of development of another tract of land that is zoned for higher-density development (provided the developer holds sufficient development rights required for the higher development density). The "market" for development rights needs to be set-up, monitored and enforced by an appropriate government entity, such as a local county government. Land use zoning is needed to maintain lower and higher density development in separate areas of a region or county. TDR programs are logistically complicated and require a high degree of collaboration and cooperation between individuals and interest groups who have a stake in how land is used and regulated in a community. If interested in farmland preservation, community leaders and citizens in Georgia are encouraged to learn more about farmland preservation tools and options by consulting the references below and then developing the set of tools that is right for their community.

John C. Bergstrom

Additional Information:

Much of the above description of farmland preservation tools was adapted and condensed from the publication: Saving American Farmland: What Works. 1997 by American Farmland Trust, Publications Divison, Herrick Mill, One Short Street, Northhampton, MA 01060. Information on farmland preservation can also be obtained on-line by visiting the American Farmland Trust website at: www.farmland.org.

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   A study was conducted to determine the capitalization of cash rents into land values in Georgia. Capitalization rates for cash rents indicate the importance of net farm income to maintaining the wealth of agricultural landowners. A standard capital asset pricing model utilizing cash rents for land focuses implications of the research results on issues related to agricultural productivity and income derived from land.

Historical Trends in Real Cash Rents and Farmland Values

   The data used for this analysis were cash rents and values reported for cropland and pasture from 1967 to 1994 by the Economic Research Service (ERS). The database of farmland values has been continued/managed since 1996 and cash rents since 1997 by the National Agricultural Statistics Service (NASS). Prevailing interest rates are represented by the prime rate of the Federal Reserve. The nominal monetary data in this study have been converted to real values by the GDP implicit price deflator of the Bureau of Economic Analysis.

   Cropland versus Pasture Cash Rents: The cash rent-farmland valuation linkage has been found to be weaker among livestock farms due to urban influence and greater income uncertainty. These farms' relative proximity to major metropolitan centers in the state suggest that non-farm factors could explain much of the variability in pasture land values. Moreover, the absence of a long history of steady and substantial government support for pasture farms (much like the longstanding experience of crop farms) suggests that existing and prospective pasture owners could be more concerned about income uncertainty for livestock farms vis-à-vis crop farms.

   Financial Factors: Increases in interest rates could lead to decreases in land values, although there is wide variability between years. Other factors, such as availability of credit from lenders, likely cause the expected negative relationship between interest rates and farmland values not to be realized in some years. Otherwise, lenders resort to risk-adjusted loan pricing practices, in addition to non-pricing tools for credit risk management, as an effective tool for rationing credit, especially during periods of high financial stress in the farm sector where the proportion of highly risky farm borrowers is increasing. Moreover, liquidity-constrained investors are more likely to postpone investments on farmland during periods of rising interest rates in favor of other alternative short-term investments that provide a more reliable liquidity cushion.

Archie Flanders, Fred C. White
and Cesar L. Escalante
Post Doctoral Associate,
Professor/Department Head,
and Assistant Extension Professor, respectively.

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   The North American Free Trade Agreement (NAFTA) has been instrumental in improving trade ties between Canada, Mexico and the United States. Canada's leading role as number one importer of U.S. fruits, vegetables, grains, oilseed and meat can be partially attributed to NAFTA. On the other hand, Mexico is still the U.S. main competitor. A total of 98% of U.S. squash import still originates from Mexico. Table 1 depicts that U.S. export of processed potatoes, fresh apples and fresh pears to Mexico increased over 15% due to NAFTA. Export to Canada for processed tomatoes increased less than 15% while there was 66% and 90% increase in snap beans and cucumber exports concomitantly.

   Although the overall U.S. export trade for the vegetable industry slightly trended upward from 2001 to 2003, the overall dollar value was lower than the import trade, thus reflecting a negative U.S. vegetable trade balance. Fresh vegetable, melon and dry bean exports trended up slightly from 2001 to 2003 (Table 3), while potato exports slightly dropped in 2002 and increased in 2003.

Calendar/Announcements/Recent Publications

For more information, contact your local county extension agent. We can be reached at:

Agricultural Economics Extension Offices

Conner Hall, Athens, GA 30602
Tel. No. 706-542-1861
Fax No. 706-542-4131

Rural Development Center
PO Box 1209,
Tifton, GA 31793
Tel. No. 229-386-3512
Fax No. 229-386-3440

Georgia Southern University, Landrum
Box 8112, Statesboro, GA 30460
Tel. No. 912-681-5653
Fax No. 912-681-0376

The Center for Agribusiness and Economic Development
202 Lumpkin House, Athens, GA
30602-7509; Tel. No. 706-542-0760

All this and more on the Web!

¨       http://www.ces.uga.edu/Agriculture/agecon/agecon.html

        For our extension programs, publications, commodity outlook reports, presentations, decision tools

¨       http://www.agecon.uga.edu/~caed/

        For feasibility, marketing, policy studies, as well as agricultural, natural resource and demographic data prepared by the Center for Agribusiness and Economic Development

• AGECON 03-82: Summer Management and Marketing Alternatives for Beef Cattle Farms by C. Lacy
• AGECON 03-83: Facts About the Conservation Reserve Program by B. Lacy and R. Harris
• AGECON 03-84: Jobs and Growth Tax Relief Reconciliation Act of 2003 by K. Kightlinger
• AGECON 03-85: Marketing Alternatives for Fall-Born Calves by C. Lacy
• Cash Rents Paid for Georgia Farmland in 2002 by W. Givan
• AR-03-01: 2002 Georgia Farm Gate Value Report by S. Boatright and J. McKissick
• HT-03-05: Business Skills and Knowledge Evaluation by K. Wolfe