Pay Dirt or Dirt Poor?
This article is about dirt. The term is mostly derogatory, so some agriculturists prefer to use the word soil. But, there is juxtaposition: you can go from being dirt poor to being wealthy if you hit pay dirt. So, sometimes dirt is good, especially if you own some in Central Illinois.
Consider two recent sales of Illinois farmland, one at $12,000 per acre, another at $6,000 per acre. Both are in the same township, both are flat and black, so why the difference? A number of factors can be at work; the most likely explanation is differences in soil types. How many different kinds of dirt are there? Lots. Different soils have different potential. A full discussion of soil science is impossible on one page, but here are some highlights:
Five factors in soil formation: 1) Parent material, 2) Climate, 3) Topography, 4) Vegetation, 5) Time. In our area we tend to split soils into two primary categories: prairie soils (dark, deep silt) vs. timber soils (whitish, shallow, high-clay).
Soil particle size: three categories are sand, silt, and clay. Sand is essentially small rocks. Some plants can grow in rocks, most can’t. Silt is a much smaller soil particle, capable of binding organic matter and water but large enough to allow percolation of air and water. Clay is really small—down to the molecular level. The different soil types are determined by varying percentages of the three soil particle categories, drainage, the depth of soil layers, and the previous soil formation factors.
Glaciation: The glaciers that flowed across Illinois had a profound impact on our Central Illinois soils. The resulting level topography, deep soil, favorable climate, and transportation systems make our part of the country among the best spots on the planet for growing crops. Route 16 running through Litchfield and Shelbyville parallels a major moraine, and the soil types north and south of that line are starkly different. Glacial Moraine State Park east of Bloomington is an interesting place to learn more about glacial features.
Soil scientists have different ways of identifying soil types, but the most popular uses the names related to the towns where the soil type is found, i.e. Hartsburg silty clay loam, Virden silty clay loam, or Muscatine silt loam. The list has hundreds of names of identifiable soil types. The first Illinois soil surveys started in the early 1900’s. More recently, the University of Illinois assigned each soil type its probable yield potential. This is measured in bushels per acre of the major crops, but also as a Productivity Index. The index goes up to 147 as a top value (Muscatine silt loam). While the index spans a continuous spectrum, we tend to talk about “Class A” soils or “Class B” and so on. The ideal farm soil is primarily silt, is porous with a high degree of natural fertility, has a high percentage of organic matter (4% is high) and can store a foot or more of water in the root zone. The more clay or sand in the soil, the shallower the soil, the less organic matter in the soil, the lower average yields you can expect.
Let’s switch from soil science to the dismal science of economics. It takes the same amount of weed killer on an acre of corn, whether the yields are 100 bu/acre or 200 bushels per acre. So if you spend $40/ acre on controlling weeds, the herbicide cost per bushel between the two farms varies from forty cents to twenty cents. The same principal applies to the other inputs. The buyer of your corn doesn’t care about your yield; they pay by the bushel, not the acre. So, you invest $400 in seed, fertilizer, and so on, you grow 100 bushels per acre, sell your corn for $4 a bushel, and guess what, you broke even. Grow 200 bushels on that acre, the first $400 of income pays expenses, and the second $400 goes into your pocket, which affects how much you will pay for that land. Divide the $400 profit by a 3.5% capitalization rate (don’t ask, no room to explain here) and you have the value of the land, $11,429/acre.
As a disclaimer, reading this article does not make you qualified to determine farmland values so don’t try it at home or anywhere else. You’ll need to consult an expert.