The
University of Georgia
Cooperative
Extension Service
College of Agricultural and
Environmental Sciences / Athens, GA 30602-4356
| Volume 19, Issue 3, July 2003
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What Can Georgia Communities Do to Preserve Farmland? 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? I. Incentives b) Agriculture conservation easements II. Regulations |
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Under the category of regulations, local land use zoning regulations are widely applied means for helping to preserve land in agriculture. A common purpose of land use zoning is to keep incompatible land uses away from each other. For example, land use zoning may prevent a new residential subdivision from being located in an area of Georgia County XYZ that is predominately agricultural. New suburban residents who are unfamiliar with the sights, sounds and smells of agriculture and the rural countryside often complain |
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operations they moved nearby to, perhaps even to the point of
brining legal action against farmers under nuisance law regulations.
"Right to Farm" laws in many states including Georgia
provide farmers with some degree and relief from such lawsuits,
but not complete protection. By clustering like land uses such
as agriculture together in an area of a county, zoning can also
provide for a "critical mass" of farms and farmers needed
to maintain the viability of the agricultural industry in the
area. In some states such as Maryland, individual counties through
zoning have established specific "agricultural districts"
in the county that encourage farming and discourage land uses
that may be incompatible with commercial farming. Cluster zoning
is another tool used by counties to protect green space and open
space, including agricultural land. Cluster zoning allows for
a higher density of residential or commercial development on one
part of a tract of land in exchange for preserving other parts
of the tract as green space or open space. "Conservation
subdivisions" in Georgia follow the cluster zoning concept.
Cluster zoning is not typically targeted at preserving farmland,
although a local community could make farmland preservation one
of the specific goals of cluster zoning.
b) Land use regulations III. Combination of Incentives and Regulations 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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The Capitalization of Cropland and Pasture Cash Rents in Georgia 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 |
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A plot of real cropland and pasture values is presented in Chart 1. Each value increased from 1967 to the late 1970's at similar rates. Decreases followed during the next decade, and resulting values were similar to 1967 levels. Land values have increased since 1991. Cropland values have increased at an average annual rate of 2.8% for a total increase of 102% since 1967, and pasture values have increased 321% for an average rate of 8.9%. Chart 2 shows a 28% decrease in real cash rents for cropland during 1967-2002 that is an average annual rate of 0.8%. During this period, pasture rents decreased at an annual average of 1.2% for a total decrease of 42%. Except for the decade preceding the late 1970's, trends for real cash rents generally correspond to trends for values. By 1979, real values had more than doubled, while rents were unchanged. Cropland |
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| values and rents declined by approximately 50% during the 1980s. Since 1990, cropland values have increased by 100%, but rents have increased only by 50%. Pasture trends were similar to those of cropland until 1990. Since 1990, pasture values have increased at a faster rate than cropland values. Pasture rents have decreased, while cropland rents have increased. | ||
Capitalization of Cash Rents Capitalization of cash rents is calculated by dividing rent by a discount factor, usually an appropriate interest rate. Rent is the income that is derived from land and represents the return as an input. A discount rate represents the rate of return from invested capital that could be alternatively applied for land rental. Expected capital gains from land ownership must be at least equal to discounted rental rates in order for purchasing to be a viable investment alternative (Clark, Fulton, and Scott, AJAE, 1993). Some of the changes in land values over time are from factors that are not readily quantifiable. Examples of these variables are anticipated |
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| effects of
current and future government programs, risk aversion, and the
expected value of land due to the supply and demand relationship
between a limited resource and an increasing population. Charts 3 and 4 show a close relationship between land values and discounted rents until 1973 for cropland and pasture, respectively. Differences in values and discounted rents have increased over time, especially for pasture since 1990. In general, this analysis has generated the following results/conclusions and implications: |
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| Break-Even Rents: Only a portion of the variation in farmland values can be attributed to cash rent levels, although these values are theoretically regarded as returns to land as an input to farm production. The determination of cash rents depends on expected returns from farming and the residual "break-even" rent level subjected to high volatility due to fluctuating commodity prices and unpredictable weather patterns. |
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| Alternative Farmland Control Arrangements: Emerging forms of leasing contracts in farming, such as share and hybrid leases, could have also pressured risk averse landlords to charge more competitive cash rental rates that are not aligned to the actual returns structure of farm businesses. Notably, these alternative leasing arrangements provide liquidity and risk reduction benefits that become more attractive to farmers especially during periods of high production and income risk 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. |
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Archie Flanders, Fred C. White |
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The overall U.S. vegetable industry import trade slightly trended up from 2001 to 2003 according to ERS/USDA report and as shown in Table 2. Import value for fresh melon declined in 2002 and slightly increased in 2003 but still lower than 2001 levels. Potato imports performed significantly well. | |
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Table 4 shows in increase in total vegetable production from 2001 to 2003 and a significant increase in potatoes. Fresh market and processed vegetable production fluctuates from year to year. | |
Quality of Fruits and Vegetables Recent survey at the Ontario Food Terminal indicated that Canadian buyers are satisfied with fruits and vegetables from Georgia, except cucumbers and zucchini where supplies from Mexican have better quality. There was great concern on packaging and labeling on packaging from Georgia. For instance, Georgia utilizes generic packaging such as "Fresh Vegetables" which does not distinguish at a glance the content of the cases. In general, however, there is a consensus that Georgia producers have improved their shipping practices within the past 5 - 6 years. Greg E. Fonsah Assistant Extension Professor top |
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For more information, contact your local county extension agent.
Agricultural
Economics Extension Offices Conner Hall, Athens, GA 30602 Rural Development Center
The Center for
Agribusiness and Economic Development All this and more on the
Web!
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http://www.ces.uga.edu/Agriculture/agecon/agecon.html For our
extension programs, publications, commodity outlook reports,
presentations, decision tools
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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 |
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Recently Released Publications
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PUTTING KNOWLEDGE TO WORK The University of Georgia College and Agricultural &
Environmental Sciences and Ft. Valley State University, and
the U.S. Department of Agriculture and counties of the state
cooperating. The Cooperative Extension Service offers educational
programs, assistance and materials to all people without regard
to race, color, national origin, age, sex or disability. An equal opportunity/affirmative action organization committed
to a diverse work force. Issued
in furtherance of Cooperative Extension, Acts of May 8 and
June 30, 1914, the University of Georgia College of Agricultural
and Environmental Sciences and Fort Valley State University,
and the U.S. Department of Agriculture Cooperating. Dr. Gale A. Buchanan, Dean & Director |
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