Recall last year that the Court of Appeals threw out an administrative rule [OAR 660-033-0030(5)], which prohibited counties from considering “gross farm income” when identifying agricultural land. The Oregon Supreme Court, in its infinite wisdom, went one step further, holding that “LCDC may not preclude a local government . . . from considering “profitability” or “gross farm income” in determining whether land is “agricultural land” because it is “suitable for farm use” under Goal 3.” Wetherell v Douglas County, 342 Or 666, 160 P3d 614 (2007).
We feared at the time that the door was now open for people who wanted to develop rather than farm their land to argue “I can’t make a profit, so my land is not farm land and I ought to be able to subdivide it and build houses.” The outcome of a case that’s now before LUBA may tell whether that fear will be realized. Friends of Douglas County’s Shelley Wetherell is mounting a stirring defense. The briefing is finished, and oral arguments await.
Developer Garden Valley Estates LLC is out to subdivide and build houses on 259 acres of farm land – land which as recently as 2005 was part of an historical and still operating 590-acre livestock ranch and which continued to support livestock grazing up until 2007.
Independent Thinning Inc. – a business offering logging and well drilling services – bought the 590-acre property in 2000 and soon initiated plans to divide and develop the property as the Indy Ranch Development Project. The 590-acre property was carved up into three parcels in 2005, including the 259-acre subject property.
The 590 acres sold for $1,678/acre in 1995. Independent Thinning paid $2,250/acre in 2000. In 2006, 259 acres of the original 590 acres were sold to Garden Valley Estates LLC for $10,980 per acre.
This is the perfect recipe for proving that farm land isn’t really farm land under a “suitability” standard that allows for profit or income to be considered: pay far more for the land than the land is worth at farm value, then complain that you can’t make a profit because of the costs of paying off the purchase.
I suppose the good news is that here in Oregon you still have to make a showing that land isn’t farm land before developing it.
Gene Logsdon in an article titled “What’s Organic Farmland Worth? Or Is It A Pearl Without Price?” at OrganicToBe.org reports:
“A cash grain farm in the cornbelt sold recently for an eyebrow-raising price just shy of $9000 an acre. It sold for farmland, not industrial development.”
He asks, how corn and soybeans pay for such high-priced land? His answer? They can’t.
“We could be looking at a possibility of what one farmer I talk to a lot calls ‘instant bankruptcy.’”
He observes that farmers who pay that kind of money for land are betting on betting on high commodity prices. They are speculating on future expectations, the same way the paper money market has been doing.
We have accepted the notion that land is a commodity to be bought and sold like paper on the stock exchange, and a financial asset on which we’re entitled to a satisfactory return on investment. As Logsdon says:
“This has led to at least two bad results in addition to high risk speculation with something more precious than paper - our food supplies: 1): Poorer people can’t afford to buy farmland so farms slowly become the property of an oligarchy of the rich; 2): To make a “profit” even rich people must farm for quantity not quality and then the land deteriorates.”
- and to a third result which Logsdon doesn’t mention: rich people (or people who aspire to being rich) must develop the land rather than farm it, without regard to our food supplies.
Logsdon tells a story about asking a “contrary farmer” why he didn’t sell out and live at ease for the rest of his life, which he could have done especially since he was happy to live modestly. The farmer paused a little and then answered.
“My farm is not for sale at any price. It is my life. And what would I do with all that money, stick it in my ear?”
Resources like oil and farmland are limited. When real resources start to run out, the fake wealth generated by our financial system won’t feed us.
Once we shake out the speculative element in farm land pricing, what’s farm land worth? Here’s Langsdon’s appraisal methodology:
“a farm will be priced by how much health and happiness it produces.”