Agriculture in Cumberland Co Fa 08

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The Impact of Developmental Pressures on Agricultural Land Allocation

Introduction

We became interested in the topic of agricultural land allocation and changes in it due to pressures from developers because we have seen first hand increasing development that has replaced agricultural land in Cumberland County, Pennsylvania.

Through our initial research of interviewing farmers in the Cumberland Valley in the Fall of 2007, it became known that farmers were very concerned about the current trend of being bought out by incoming developers. They stated that the lay of the land has dramatically changed in recent years and they expected that it would continue to increase in the near future.

We continued this initial ethnographic research, creating a more comprehensive report on the effect of developmental pressures on agricultural land allocation, focusing on Cumberland County. We will be considering general trends—historical and current—in the changes to agricultural land. Our research will include consideration of the factors affecting the price farmers are willing to accept for their land and that which developers are willing to pay. We will then outline the economic and environmental impacts of this land use conversion. The study concludes with some recommendations on how improve farmland preservation.

WTA and WTP: Why Farmers Sell and Why Developers are Buying

A combination of factors flowing from both the agricultural and development sectors are combining and resulting in the usage of greater amounts of farmland for development.

The desire of farmers to sell their land and for developers to purchase this land is reflected in the price of farmland. A 1997 study of farmland prices in West Virginia found that the price of farmland is impacted by the past and expected future returns from farming and pressures from urban development. These two factors seem to be the primary determinates of farmland value. Thus, from the perspective of the farmers, changes in the price of agricultural goods and the necessary inputs for the production of these goods determine the price they are willing to accept for selling their land. For developers, the land’s proximity to urban centers acts as the primary motivation for offering a higher price. Inflation also plays an important role in setting the price of farmland, suggesting that macroeconomic changes play a role in this equation along with the regional factors.

Why Farmers are Selling

Farmers are experiencing difficult times. According to a 2007 study, 84 percent of young farmers in Pennsylvania stated that they had experienced significant economic difficulties. These hardships are resulting in an increasing willingness of farmers to sell their land. There are also fewer young people willing to work in the agricultural field and the average age of farmers is increasing. Several primary challenges exist for farmers. These include low prices for crops, high prices for land and equipment, and financing difficulties.

The price of farmland seems to be largely influenced from within the farm sector. Returns to agricultural production impact the price of the land, while the opposite does not occur. If nonfarm returns were an important factor, such a land-price influence would be expected. The greatest power over the price of farmland seems to be commanded by the agricultural field, specifically the returns to farming. Therefore, crop prices and the cost of inputs have a large impact on the willingness of farmers to sell their land.

Compounding the difficulties that Pennsylvania farmers are experiencing regarding the low returns for the sales of their products, is the comparatively small size of farms in this state. Despite the importance of agriculture to the Cumberland County economy, the majority of its farms are categorized as small scale operations and have sales under $10,000. This is a problem because the prices of many agricultural products are set nationally. These nation-wide crop prices are therefore applied to farms of all sizes. The smaller Pennsylvania farms, unable to take advantage of economies of scale, must therefore sell their products at the same price as the large farms of the Midwest.

A second threat to the agriculture industry is the rising cost of inputs—primarily land. Seventy-seven percent of farmers in Cumberland County reported that increasing land prices were endangering the survival of their farms. The greater funds available to developers enable them to purchase this land instead of those intending to use it for farming.

Many state and local governments have begun to purchase the development rights for farmland in order to keep this land from being developed and help ensure that land for agricultural producers entering the market. The Pennsylvania Bureau of Farmland Preservation has protected more farmland than any other equivalent state agency. Relinquishing the ability to develop this land would seem likely to greatly lower its value. However, a study of the Maryland farmland market found that, while a slight price decrease did occur, no significant change took place. This unexpected result is probably due to a belief that the current restrictions imposed by the government programs will not be in place in the future. Another result of this lack of drop in the prices of preserved farmland is that newly entering producers cannot purchase the land at the agricultural use value. Inability to obtain land at this price will discourage new farmers from entering the market. While these farmland preservation programs are managing to secure some agricultural land from development, they have been largely unsuccessful in keeping land prices affordable to farmers.

The difficulty of obtaining financial aid is the third major threat to agriculture. Securing capital is essential in order to counter the rising costs involved with farming. Lower agricultural returns exacerbate this problem for farmers already in business seeking to gain additional equipment or land. But these financing problems are most problematic for those seeking to enter the agricultural production market. The lack of funding is a great deterrent to potential farmers as well as a source of problems for already existing producers.

Why Developers are Buying

Population growth has necessitated increasing development. Land is needed for this development. There are several reasons influencing why farmland is chosen for this change in land usage and which farms are considered more desirable.

The fact that most farmland is flat and well drained makes it ideal for developmental purposes. Farmland is also more desirable to developers because it is lightly populated and separated from established urban centers. While a grouping effect is seen in the establishment of industrial and commercial centers, residential development is much more fragmented and spread out, demonstrating a preference for utilizing less densely populated areas in residential development. Thus, the desirability of farmland for conversion to residential land-use increases due to its sparsely populated and more isolated nature as well as the nature of the land itself.

The relationship of a piece of farmland to its surroundings—particularly cities—alters its desirability to developers. Urban sprawl influence on the farmland market can be explained through a gravity-like model. The distance of a piece of farmland from an urban center, squared, has an inverse relationship to the price of that land. Thus, if the distance decreases due to the spread of that urban area or a change in infrastructure the price of the surrounding farmland will increase. This change will be less dramatic at greater distances. Similarly, the population of an urban center has a direct relationship on the value of the surrounding farmland. An increase in the size of the city will cause an increase in farmland prices.

Environmental Impacts of the Shifting Agricultural Landscape

With nearly 1 billion acres of land in farm use, agriculture is America's dominant land use.

References

Carrión-Flores, Carmen and Elena G. Irwin. "Determinants of Residential Land-Use Conversion and Sprawl at the Rural-Urban Fringe." American Journal of Agricultural Economics 86, No. 4 (November 2004): 889-904.

Cumberland County Pennsylvania. "Chapter Five: Farmland Preservation." 2008. http://www.ccpa.net/DocumentView.asp?DID=750 (accessed December 7, 2008).

Just, Richard E. and John A. Miranowski. "Understanding Farmland Price Changes." American Journal of Agricultural Economics 75, No. 1 (February 1993): 156-168.

Moss, Charles B. "Returns, Interest Rates, and Inflation: How They Explain Changes in Farmland Values." American Journal of Agricultural Economics 79 (November 1997): 1311-1318.

Nickerson, Cynthia J. and Lori Lynch. "The Effect of Farmland Preservation Programs on Farmland Prices." American Journal of Agricultural Economics 83, No. 2 (May 2001): 341-351.

Pennsylvania Department of Agriculture. "Bureau of Farmland Preservation." 2008. http://www.agriculture.state.pa.us/agriculture/cwp/view.asp?a=3&q=128859 (accessed December 7, 2008).

Phillips, Jason K. and Diane M. Phillips. "An Investigation Into the Needs and Concerns of Young Pennsylvania Farmers." June 2007. Center for Rural Pennsylvania. http://www.ruralpa.org/young_farmers.pdf (accessed December 1, 2008.)

Phipps, Tim T. "Land Prices and Farm-Based Returns." American Journal of Agricultural Economics 66, No. 4 (November 1984): 422-429.

Shi, Yue Jin, Timothy T. Phipps, and Dale Colyer. "Agricultural Land Values under Urbanizing Influences." Land Economics 73, No. 1 (February 1997): 90-100.

Research

Pennsylvania Game Commission- Reduction of Farms and Crop Production: http://www.pgc.state.pa.us/pgc/cwp/view.asp?a=496&q=166106&pp=12&n=1

Governor Rendell Discusses Farmland Preservation Plan During Cumberland County Visit: http://www.agriculture.state.pa.us/agriculture/cwp/view.asp?A=390&Q=131148

Pennsylvania County Data - Farm Numbers: http://www.nass.usda.gov/QuickStats/PullData_US_CNTY.jsp

Research Paper- Why young farmers don't want to farm

http://www.ruralpa.org/young_farmers.pdf

NY Times Article- Farms are disappering in PA, Gov. bond to make them stay

http://query.nytimes.com/gst/fullpage.html?res=9B0DE2DC123FF932A35752C1A961948260