Buying a farm is a big decision. This piece of land isn’t just going to provide shelter but also be the source of your sustenance each month.

Given what’s at stake, it’s important to do as much research as possible before buying a farm. That includes understanding the laws in your state, taking stock of the real estate market, and comparing different financing options.

Here’s what you need to know about getting into the agricultural business in Arkansas.

Study the Local Market

Before you buy farmland or any land for that matter, it’s essential you have a good understanding of the state of the market in your state. This is especially important for farmland because you won’t just build a house on it, but use it to generate profits from the land month on month.

The price of farmland in Arkansas has been on the rise over the past few years. Experts suspect that the ballooning prices have to do with farmland being bought for non-agricultural purposes, thus increasing their appeal to a wider range of buyers.

As of August 2018, the average land value per acre of irrigated farmland in Arkansas was $3,380. Non-irrigated farmland was priced at $2,050 per acre on average.

If you’re renting, on the other hand, the average rent for irrigated cropland in the state in 2018 was $136 per acre. The rent for non-irrigated cropland in Arkansas in the same period was $49.

Agriculture is the biggest contributor to the Arkansas economy. In 2012, the total value of crop production in the state was $4.7 million. Out of that, food grains were responsible for $1.3 million and oil crops $1.6 million in value. Livestock production was valued at $4.5 million in the same year.

The yield that you get for a particular crop depends, of course, on where you’re located. In Arkansas, soybeans sold at $9 per bushel in 2018. Wheat was priced at a yearly average of $4.90 per bushel.

Leasing Laws for Agricultural Land in Arkansas

As of February 2013, 29% of the agricultural land in Arkansas was farmed by a tenant. It is a very common practice for those who own farmland to lease it out to a farmer to work on a year-to-year basis.

In many cases, the lease is given with a verbal agreement between the owner and a farmer. In Arkansas, leases that are made for a period of one year or less don’t need to be put in writing in order to be valid. It’s only leases that last more than a year that need to be recorded in writing.

Paying a cash rent is not the only form of leasing land in Arkansas. You could also have a crop-share lease, whereby the landlord is promised a portion of the crops produced on the land. Since this form of leasing land comes with its share of risk, the landlord and tenant can get crop insurance and qualify for indemnity payments in cases where the crop is damaged.

There are a number of ways in which the lease on farmland can be terminated. In cases where an oral lease was used, the owner has to inform the tenant of the termination by June 30 that the land will not be available to use the next year.

If a written lease contract does not have a termination clause, tenants with a year-to-year lease are automatically given a six-month notice period. Month-to-month leases require a 30-day notice of termination.

Review Previous Leases & Possession Claims

If you’re considering buying farmland in Arkansas, you might think that you don’t need to concern yourself with the state’s leasing laws. But it is important that you’re cognizant of the laws in the state as well as the ownership history of farmland you’re considering purchasing.

As we saw in the previous section, leases are often agreed upon between owner and tenant on an oral basis. So it isn’t always possible to rely on written records to find out if there’s a third-party who has been given a right to use the land. For that reason, it’s imperative that you have the owner of the land sign away any lease rights that they may have given before you buy the land.

Another common scenario in farming is the adverse possession claim. This is a case where even though someone owns a piece of farmland, somebody on a neighboring piece of land contests its boundaries.

If you buy a piece of land that is contested by a neighbor, you might have to deal with a lawsuit. Always carry out a boundary survey before purchasing farmland so you are aware of any adverse possession claims.

Arkansas Farmland Taxes and Exemptions

The taxes that you pay on your farm in Arkansas are based on its valuation.

In order to determine the value of farmland in the state, professional appraisers are sent out by the county. Appraisers take into consideration factors like the productivity per acre and crops grown on the land in order to assign a value to the land. Appraisers use Arkansas’ Assessment Coordination Department to make sure that valuations are made in a uniform way based on property size and land use.

Arkansas has certain mandatory assessments it carries out to make sure that produce is healthy and of a high quality. For example, there is a wheat assessment tax of $0.005 per bushel to inspect for any crop diseases.

The sales tax rate in Arkansas is 6.5%. However, the Arkansas Farm Bureau gives small farmers various sales tax exemptions. Agricultural producers in Arkansas are given an exemption on machinery, chemicals, fuel, seed, feed, and animals.

Loan Programs and Assistance for Farmers in Arkansas

The United States Department of Agriculture’s Farm Service Agency (FSA) has created the Beginning Farmer Loan Program to help those looking to enter the profession of farming. Among other things, a beginner farmer is someone who hasn’t operated a farm in over 10 years.

To assist beginner farmers, the FSA provides guaranteed loans to those who qualify. That includes both farm loans as well as farm operating loans

Those looking to buy a farm should always do so with the help of a local real estate agent. An agent can help you identify land that you can use profitably and raise the required funding based on programs offered at the state and federal level.

Clever Partner Agents come with a number of years of experience helping buyers obtain land at the best prices. Fill out the form on our website to set up a no-obligation consultation call with a Partner Agent near you to find your farm in Arkansas.