I have planted many a golf ball in a corn field but have not planted much corn on a golf course. See here WHY Iowa farmers are doing just that. How do you say "FORE!" in corn lingo??

A nice article in the NYTIMES today about farmers in Iowa  using every bit of land they can to grow crops, even land that previously had been deemed not worthy of cultivation.  This is an excellent example of increasing opportunity costs as it related to the Production Possibilities Frontier:

"Across much of the Midwest the sharp increase in farm earnings has driven the price of farmland to previously unimaginable — and, some say, unsustainable — levels. But in the process, to much less fanfare, the financial rewards have also encouraged farmers to put ever more land into production, including parcels that until recently were too small or too poor in quality to warrant a second glance."     

Most of the land they currently grow crops on could be labeled "low hanging fruit" which means that relatively little, other than the basics to cultivate, plant, maintain, has to be done to harvest the crop.  It is the most suitable land for growing crops.  However, this fertile land is not unlimited and "at the margins" of the acreage land is going to become less suitable, hence more expensive to convert to growing crops. 

The "opportunity cost" (explicit and implicit costs) of converting this land to grow food is too high relative to (1) the price they might receive for any food grown on it, or (2) an alternative use this land might have may be more suitable for the production of some other good:

A splash of green on a solid beige horizon, the golf course at the edge of this tiny town promised residents nine modest holes of refuge from corn country. Decades earlier the spot had been farmed, too, but the rocky soil was so poor, the saying went, that you couldn’t raise hell there with a fifth of whiskey.         

“The rottenest piece of land there is,” said Mick Elbert, a local car dealer who served on the golf association board. “All it is good for is a golf course. That’s why we built it there.” As Crop Prices Soar, Iowa Farms Add Acreage

Now that there appears to be sustained higher prices for various agricultural commodities, farmers and the communities they live in,  are willing and able to spend additional money and resources (equipment, time, etc) to cultivate this less suitable land because the opportunity cost of NOT doing so (foregone profit for farming relative to the profit, or lack there of, for the golf course) is now greater. 

""But this year, over a chorus of objections, the greens and fairways were plowed under. The course had been losing money, and crop prices had been breaking records, so the new owner did the type of quick calculation that is quietly reshaping the region and determined that it was more valuable as farmland. The first harvest took place this fall..."

For extra credit, draw a Production Possibilities Frontier showing the production of only two goods, Food and Golf Courses.  Show on the graph the result of the landowners decision about what to do with his land ("resource").  Explain why you drew your PPF curve the way you did (straight line or bowed). 


Read the whole article below the fold:




WHITTEMORE, Iowa — A splash of green on a solid beige horizon, the golf course at the edge of this tiny town promised residents nine modest holes of refuge from corn country. Decades earlier the spot had been farmed, too, but the rocky soil was so poor, the saying went, that you couldn’t raise hell there with a fifth of whiskey.

“The rottenest piece of land there is,” said Mick Elbert, a local car dealer who served on the golf association board. “All it is good for is a golf course. That’s why we built it there.”

But this year, over a chorus of objections, the greens and fairways were plowed under. The course had been losing money, and crop prices had been breaking records, so the new owner did the type of quick calculation that is quietly reshaping the region and determined that it was more valuable as farmland. The first harvest took place this fall.

Across much of the Midwest the sharp increase in farm earnings has driven the price of farmland to previously unimaginable — and, some say, unsustainable — levels. But in the process, to much less fanfare, the financial rewards have also encouraged farmers to put ever more land into production, including parcels that until recently were too small or too poor in quality to warrant a second glance.

As Iowa marches toward the Republican caucuses, much of the politicking has been set against the timeless backdrop of open farmland. These agricultural vistas are expanding across the Corn Belt, where the fertile and increasingly profitable soil has helped this state weather the nation’s economic storms.

Farmers are taking down the old barn or the grove of trees that shaded a corner of the family farm to squeeze in a few more rows of crops. They are plowing up areas previously used for grazing cattle or set aside for conservation because they had been deemed too wet, too sandy or too hilly for farming.
And they are returning crops to places that had been reserved for ostensibly more lucrative purposes like strip malls, housing developments or, in several cases, struggling small-town golf courses.

“One day it’s grassland, and the next day it’s black dirt,” said Jim Ringelman, the North Dakota-based director of conservation programs for Ducks Unlimited, a hunting and conservation group worried about the trend. “It’s that quick.”

There are no encompassing statistics about how much land is being cleared, but farmers and environmentalists around the region agree that the available figures and anecdotal evidence suggest a significant increase in the amount of dormant land going back into production. There is debate over whether this should be a source of concern.

Craig Cox, the head of the Midwest office of the Environmental Working Group, which has released a report warning about farmland erosion, stressed that the more aggressive farming tactics, like removing trees that act as windbreaks or buffer areas that surround streams, put both land and water at risk.

“It’s really disturbing,” Mr. Cox said. “Farmers are pushing as hard as possible to get every last bushel out of every last acre.”

In Iowa, the nation’s biggest producer of corn and soybeans, farmers insist that they are simply getting more value from their land. Darrell Coddington, a farmer who runs an excavation business, has spent much of the past year clearing additional land in the hilly and wooded southern part of the state, including places that used to be left alone and derided as a “cocklebur farm,” referring to the thorny weed.

While working one overgrown parcel for a neighbor, Mr. Coddington discovered a rusting horse-drawn plow buried beneath a foot of earth, a find that suggested the land had not been farmed in a century. And while expanding his own cropland he decided to tear down the empty family homestead, an action that he described as sad but economically justified.

“Hey,” he said, “it was farm ground before they built it.”

The force pushing more land into production is the rise in crop prices: in the past five years corn prices tripled and those for soybeans doubled because of swelling worldwide demand, including demand for ethanol production. At the same time yields have spiked because of genetically engineered crops and improvements in farming technology, which are also allowing farmers to grow in previously inhospitable areas.

In turn farmers, flush from the most profitable years in decades and looking for better places to store money than low-interest savings accounts or a turbulent stock market, are putting their money in land.
In Iowa, the state with the highest gains in the Midwest, the average price of farmland grew a record 32 percent last year to $6,700 an acre, according to a study released last week by Iowa State University. This month a land auction in the northwest corner of the state shattered records when one farm sold for $20,000 an acre, prompting another round of warnings of a real estate bubble.

Many of those not buying new land are instead putting money into their operations by buying new equipment or undertaking long-planned projects for their property like tearing down trees, buildings or fence rows to make more room for crops.

Others are pulling land out of the federal Conservation Reserve Program, which pays a per acre fee to farmers who agree to leave their land idle for a decade or more. Enrollment in the program, praised by environmentalists and hunters for improving water quality and wildlife habitat, peaked at 36.8 million acres in 2007 and dropped to 29.6 million acres last month, in part because farmers believed they could make more by farming than the $53 per acre average paid for conservation.

In Iowa, just 9 percent of farmers with expiring contracts in the program renewed them in 2009. With a spike in expiring contracts next year and Congress considering scaling back the program, which has paid out more than $1.7 billion so far this year, significantly more marginal land could return to production.

It is not just land in the country that is being returned to production. In the Des Moines area, farms that were bought for development — even parcels that were cleared and graded — are being tilled and planted again, some rented as a stopgap measure and some permanently sold off. “It may be worth almost as much now as farm ground as it was for development,” said Bill Northey, the state agriculture secretary.

Todd Volz, a farmer who pays to grow hay on these vacant properties in urban areas, said more developers are using this income until the housing market recovers. “I can’t handle all the work,” Mr. Volz said.

Another casualty has been small-town golf courses, many of which were already struggling. In Rockford, about a two-hour drive east of here, Jim Dow, the owner and manager of a 78-acre course, has been turning over the land, removing 750 trees in the process. Though he has never farmed, he believes he could turn a profit with the current prices. Better yet he might be able to sell a property that had been languishing without bidders.

“Maybe once people see it’s plowed,” he said, “someone will make an offer.”