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July 2011 Archive for Your Precious Land

RSS By: Mike Walsten, Pro Farmer

Mike Walsten has covered major business trends in agriculture for more than 40 years.

Farmland Index Shows Slippage In Pace of Price Gains

Jul 28, 2011

Mike Walsten

Some analysts are making much out of the latest survey results from Creighton University. Economics Professor Dr. Ernie Goss conducts a monthly survey of rural bank CEO's in 10 states. It monitors the health of the rural main street economy in the heartland. His latest survey finds the farmland price index slipped for the third consecutive month. Of course, any slippage is a cause for and "oh oh" moment. And Goss highlights the slippage by saying: “Even though this is the 18th straight month the index was above growth neutral, we are tracking consistent slippage in farmland price growth as the index has declined for three straight months. Consistent with the decline in farmland price growth, the farm equipment sales index sank for the fourth consecutive month to 53.7 from 63.1 in June,” says Goss.

His point is valid. But rather than calling a turn in demand for the farmland market, the index is more likely indicating that the recent power in demand is leveling out, and not going away. After all, the value of Iowa farmland has surged 36% while Nebraska farmland has jumped 23% the past year, according to the semi-annual update from Farm Credit Services of America (FCSAmerica), Omaha, Nebraska. It's hard to maintain that kind of rate of increase. The recent sale of 237 acres in Grundy County, Iowa, for an average price of $11,338 an acre hardly suggests buyers have left the land market.

The slippage in the index reflects the divergence in the farmland market. The demand focus is on quality cropland. Demand for lower-quality cropland, pasture and ranchland is not nearly so strong. Again, the FCSAmerica appraisal update makes that point. The average value of its benchmark farms in South Dakota, a state with a much higher percentage of pasture and ranchland than either Nebraska and Iowa, rose 14% versus Nebraska's 23% and Iowa's 36% gains. Wyoming, meanwhile, posted a 3% decline, according to FCSAmerica.

The easing in the index also reflects problems associated with the continuing drought in the Plains and concerns over the intense heat this summer causing reduced yields. Meanwhile, the index remains above 50, which is growth neutral. That's a positive sign. See the Creighton survey here.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

More Farmland Sales In Excess of $11,000/a in Central Corn Belt

Jul 15, 2011

Mike Walsten

The run of $11,000+ per acre land sales in the Central Corn Belt continued Thursday with the sale of 237 acres of Grundy County, Iowa, farmland at an auction conducted by Farmers National Company. The farmland offered was prime cropland, nearly all tillable and sporting CSRs (corn suitability rating) ranging from 87.3 to 89.6 in a county that carries an average of 84.7. ( Iowa's CSR index rating ranges to a maxium of 100.) No other Iowa county carries an average CSR in excess of 80. So the soils in Grundy County's are truly the best-of-the-best in the state. This offering was above average for the county. Conrad is a well-known seed corn area and there was a history of seed corn production on some of the acres offered. The ground was offered in three tracts but purchased as a single unit.

This sale came on the heels of recent auctions in Illinois which topped $11,000 and $13,000 an acre. June 16 saw 52.5 well-tiled acres located east of Ursa in Adams Co., Ill. (far western Illinois), bring $13,200 acre. Buyers were farmers who operate ground on two sides of the offered property. That auction was handled by Sullivan Auctioneers, LLC, Hamilton, Illinois.

June 24 saw 364 acres located southeast of Havana in Mason County, Ill., sell for $4.01 million or $11,016 an acre in an auction handled by Murray Wise Associates, LLC. That repeated the pattern seen at recent auctions in Champaign County, Ill, which saw ground selling from $11,000 an acre to in excess of $13,000. However the Champaign County auction involved soils considered some of the "best of the best" in the world (high-end Class A soils) while the soils involved in the Mason County auction were actually Class B soils – Champaign County-type soils are not available there.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Rabobank: Not A Bubble In Farmland, But Correction Likely 3 to 7 Years

Jul 11, 2011

Mike Walsten

Farmland is not a bubble, but a downward correction in values is likely is the conclusion of a special Rabobank report written by Sterling Liddell and Vernon Crowder. Basically the 8-page document indicates current price levels for Midwestern farmland are the result of favorable profit margins and low interest rates. But as profit margins narrow due to rising input costs, crop prices decline due to rising production worldwide and interest rates rise over time, the authors see increased risks of a correction in land values in the next three to five years. But they see that correction as only moderate.

For more, here is a short article based on an interview with the report authors conducted by Jeff Wilson of Bloomberg. I'll have more on this in the next issue of LandOwner.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Iowa Farmland Posts 17%, Nebraska 12% 6-month gain

Jul 01, 2011

Mike Walsten

The value of Iowa farmland jumped 17% the past six months, according to the semi-annual assessment of benchmark farm values conduced by Farm Credit Services of America, Omaha, Nebraska. The large lending institution regularly monitors real estate value trends through semi-annual appraisals of 66 farm located throughout the association's Iowa, Nebraska, South Dakota and Wyoming service area. The latest update found Iowa's 21 benchmark farm values increased from 5.5% to 46.4% with an average increase of 17% from January 1 to July 1. For the year, the appraisal update found Iowa values rose 36.1%.

Nebraska's 20 benchmark farm values changes ranged from stable to 38.5% higher with an average change of 12.4% for the most-recent six-month period. Nebraska values are up 23.4% for the year.

South Dakota's 23 benchmark value changes ranged from -18.5% to +34.4% with an average change of +8.5% for the six-month period. The annual change is 13.9%.

Wyoming's ranch benchmark decreased 2.2% with the irrigated benchmark considered stable.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023.

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