Throughout the history of agriculture, producers have found ways to increase the volume of foodstuffs produced from one acre of land. In 1950, an acre of corn produced on average 38.2 bushels (USDA NASS). Now, according to the USDA, our farmers can produce more than 147 bushels of corn from one acre. While this increased production capacity might have meant that farmers didn’t need as much land, the production increase was paralleled (and partly prompted) by mechanization in agriculture, namely the million dollar combines. These extreme equipment costs and high food prices led those already in agricultural production to buy up land in efforts to continue to turn a profit.
According to the 2012 Agriculture Census, there are over 2.1 million farms in the United States, a 4.3% decrease in the number of farm since 2007. This drop in farm numbers is counteracted by an increase in farm size. The national average farm size in 2007 was 418 acres, climbing to 434 acres in 2012. For Maryland this 2012 average farm size was an even smaller 166 acres. Maryland is an especially hard place to be a farmer due to the close proximity of the dense population areas of Baltimore and Washington D.C.
So if you live in Maryland and want to start farming, how do you find land?
As previously stated in the first blog of this series, the American Farm Bureau Federation ranked land access as the number one challenge for beginning farmers. Maryland’s farmland values are roughly three times the national average, and much higher around the lucrative urban centers. It simply does not make financial sense to buy the property to farm unless one has other income sources and can consider the land as an investment to resell.
Many beginning farmers lack the financial resources to buy land or they would prefer to invest in their farm business rather than tying up all their capital on land purchase. Land leasing is a viable option in Maryland. The majority of Maryland farmland is leased on a year-to-year basis for grain or forage production. A disadvantage of leasing is that it is difficult to secure leases long enough to be comfortable making major improvements to a farm. If you know what your long-term business plan is and you can find a property that fulfills those needs, then land purchase may be the best option.
So how can Beginning Farmer Success & Maryland FarmLINK help?
UMD’s Department of Agricultural and Resource Economics, Agriculture Law Education Initiative, and FarmLINK webinars address issues such as finding land to lease and determining if the soils, zoning, and other restrictions will permit a farmer to operate as he/she wishes. A sample lease agreement serves as a great guide for Maryland farmers.
Maryland FarmLINK is working with land owners and realtors throughout the state to identify properties for sale and post them on the Property Exchange, a free service. FarmLINK provides free online resources about zoning, land preservation easements, leasing documents, and more.
One solution: Leasing
Leasing farmland can be a great way for farmers to get started. Roughly 64% of all Maryland farmland is leased. The following analysis of the advantages and disadvantages of leasing in an excerpt from the New England Farm Leasing online tutorial.
Advantages of Leasing
An excellent way to get started. As a new or beginning farmer, leasing can be an excellent strategy to test your farming skills and become acquainted with the particular piece of land without making the investment of buying it. If you discover that farming is not for you after all, or that the piece of land is not suited to the type of farming you want to pursue, you have the flexibility to move on without the burden of owning the real estate.
Available land. Throughout New England, land prices have steadily risen while residential and commercial development have reduced the amount of available farmland, so finding an affordable farm to buy can be a serious challenge to farmers. More and more non-farming landowners and retiring farmers have farmland they do not want to sell, but would consider leasing to a farmer.
Wise use of capital. For many start-up farmers, initial investment should be focused on building the business instead of buying real estate. Often new and beginning farmers think that their first step should be to purchase land. They end up frustrated when their farming career idles while they search for that “perfect” farm. You can jumpstart your farming career by leasing land, investing your dollars into building a successful business.
Affordability. Renting land can be cheaper than owning. The financial benefits of leasing versus owning include: a) the ability to take tax deductions for leasing costs; and b) not having to pay property taxes and other costs associated with owning real estate.
Disadvantages of leasing
No ownership of farmland. Although leasing gives you access to farmland and can provide secure tenure, the bottom line is you do not own farmland. For many new farmers eager to have their own place, farming is equated with owning—some simply feel they must own land to farm it. The reality is that many farmers both own and lease farmland. However, if you are not willing to farm without owning land, leasing is not for you. Also, while some longer-term leases can serve as collateral, you should not own land in order to borrow capital against it.
Insecure tenure. Leasing can be an insecure form of tenure. Because you do not own the land, and especially if you have a short-term lease and/or no written lease, leasing can leave your farming operation vulnerable to your landlord’s changing priorities or situation.
Limited investment. A tenant is much less likely to make investments in leased property, especially with a short-term lease, where you might not see the return on your investment during the life of the lease.
Requires a relationship. Successful leasing requires effective communication on the part of both the landowner and the tenant. If you are not willing to discuss issues and negotiate with a landowner, then leasing will likely be difficult.
Poor or few opportunities in your area. Poor quality land—soils that are too wet or infertile—and insufficient access to that land are reasons not to lease. Consider NOT leasing a parcel if you will need to invest a considerable amount of money in soil fertility, particularly if you cannot recuperate those costs within the term of the lease agreement.
Identifying land use restrictions on your new property
Most open farmland in Maryland can be used for commodity crops. However, before signing a lease or purchasing a property, it is best to be safe and determine if there are any zoning, covenant, easement, or plat restrictions, particularly if you are considering direct farm or value-added sales ( wineries, creameries, etc.), or agri-tourism ( corn mazes, on-farm weddings, etc.). Restrictions may be found in many places:
Zoning Ordinances: Nearly every county in the country has a zoning ordinance and each one is different. However, most counties use similar zoning terminology and most in Maryland are available on-line, along with the zoning maps which define where the ordinances apply. A zoning tutorial is available on-line, along with links to county plans, ordinances and maps at Southern Maryland Agricultural Development Commission (SMADC): Zoning Tutorial for New Farming Enterprises
Selecting a farm property is one of the most important tasks to ensure success as a beginning farmer. Taking time to research a farm’s potential productivity, land-use restrictions, and capability before committing to a long-term lease or purchase will pay off in the long run.