Sep 19, 2014
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January 2014 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.

Institutional Farmland Index Posts 9.3% Gain in Q4

Jan 22, 2014

Mike Walsten

An index of institution-held farmland rose slightly more than 9% in the fourth quarter of 2013, according to the National Council of Real Estate Investment Fiduciaries (NCREIF). The NCREIF Farmland Index, which consists of 546 investment-grade farm properties throughout the U.S. The total return for the quarter was 9.26%, comprised of 5.02% appreciation and 4.24% income return, says NCREIF. This is above third quarter’s 2.94% total return, but below fourth quarter 2012’s 9.56% total return.

The fourth quarter typically has the highest income and total return, states NCREIF. The average total return over the history of the index is 2.89% and the fourth quarter average is 6.08%. Excluding 2012, this quarter’s total return was the highest quarterly return since fourth quarter 2006.

The trailing four quarter total return dropped slightly from 21.25% to 20.91%. That is the second highest total return over a four-quarter period since fourth quarter 2006. The split on the trailing four-quarter return was 11.50% appreciation and 8.73% income. The four-quarter rolling return from a year ago was 18.58%.

For the third consecutive quarter, permanent cropland outperformed annual cropland. Permanent cropland had a 16.85% total return compared to annual cropland’s 5.63% return. Permanent cropland’s 16.85% return was split between 6.19% appreciation and 10.66% income. This was the best performance by permanent cropland since fourth quarter 2005. The income return was also the highest since fourth quarter 2005. The rolling four quarter return was 29.77%, split 10.14% appreciation and 18.57% income, the highest since third quarter 2006.

The Pacific West was the best performing region by a significant margin with a 17.49% total return. This was split 7.96% appreciation and 9.52% income. The next closest region was the Delta region with a 6.39% total return. The Pacific West’s strong return was driven by permanent crops which returned 20.74% including 12.56% of income. On a rolling four quarter basis, the Pacific West’s 32.05% exceeded all the other regions with the Mountain region’s 24.64% being the next closest.

The Southern Plains and the Mountain region were the worst performing regions for the quarter with 1.97% and 2.77% total returns, respectively. The Southern Plains only had 0.79% appreciation and the Mountain region’s income return was 0.99%. The Southern Plains was also the worst performer on a rolling four quarter basis at 12.04%, just trailing the Corn Belt’s 13.05%.

Christopher Jay, Chairman of the NCREIF Farmland Committee and Director of Financial Analysis with Prudential Agricultural Investments, notes: "Farmland continues to have impressive returns with 2013's total return of 20.91%. The year had strong performance in all regions of the country and in many commodity sectors, but this was especially true for permanent crops in the Pacific West, which were led by almond and pistachio properties. The 2013 total return marks the third consecutive year with returns over 15%. Eight of the past ten years have also seen returns over 15% on a total farmland basis. Global macroeconomic trends are continuing to shape demand for agricultural products with favorable results for both income and asset values."

The NCREIF Farmland Index consists of 546 investment-grade farm properties; comprised of 400 annual cropland properties and 146 permanent farmland properties. The index includes 175 properties in the Corn Belt, 124 in the Pacific West, 66 in the Delta States, 54 in the Pacific Northwest, 45 in the Mountain States, 33 in the Lake States, 25 in the Southern Plains and 23 in the Southeast.

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

Banker Survey Finds More Slowdown in Farmland Values

Jan 16, 2014

Mike Walsten

Demand for farmland continues to turn downward, according to a monthly survey of rural bank CEO's conducted by Dr. Ernie Goss of Creighton University. The most recent survey found the survey's farmland and ranchland-price index plunged to 43.8, its lowest level since October 2009, and was down from December's 47.0. The index ranges from 0 to 100, with 50.0 representing growth neutral.

"This is the second straight month that the farmland and ranchland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices. On the other side of the economic coin, ranchers and livestock producers are experiencing record prices and a very healthy economic outlook," says Goss.

Farm equipment sales remained below growth neutral for the seventh straight month. The January index sank to a weak 41.0, the lowest reading since October 2009, and down from December's 44.3. "Over the past year, commodity prices for all farm products have declined by roughly 8%. This has significantly reduced farmers' willingness to undertake major agriculture equipment purchases," states Goss.

Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of a 10-state Midwestern area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index focuses on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

The Rural Mainstreet Index fell to 50.8 from December's much healthier to 56.1, says Goss. "The overall index for the Rural Mainstreet Economy continues to indicate that the areas of the nation highly dependent on agriculture and energy continue to expand at a positive but slower pace. Over the past year, corn, soybean and wheat prices have declined by 41%, 10% and 16%, respectively. Weaker farm prices are clearly negatively influencing the rural economy. Additionally, almost 80% of bank CEOs expect the EPA's cut in ethanol blending level to negatively affect the Rural Mainstreet economy," notes Goss.

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

Farmers National Looks Ahead to Farmland Values in 2014

Jan 10, 2014

Mike Walsten

Land sales finished strong in 2013, spurred by good farmer demand for additional land, according to Farmers National Company, the large farm management and farm real estate firm headquartered in Omaha, Nebraska. Recently the firm issued a release highlighting their company's real estate activities and their views for 2014. Below is the full release:

The firm reports record real estate sales of $750 million for 2013, compared to $640 million in 2012. Activity during the first half of 2013 slowed slightly because of a surge in sales at the end of 2012 prompted by tax law changes. However, sales levels turned upward to round out the year and finished strong, according to Randy Dickhut, AFM, vice president of real estate operations of Farmers National Company. He notes that trends indicate an active pace will continue through the first half of 2014 for most regions.

Within Farmers National Company’s 24-state service area, there has been continued widespread auction activity at year-end. Firm real estate agents worked 45 auctions during November alone. Out of 829 properties sold by the company in 2013, over 40% sold at auction. While land prices have stabilized compared to the double-digit price increases seen in recent years, levels are at historical highs. Prices per acre for high quality land range nationwide from $3,500 to as high as $12,000 to $13,000 per acre in areas of Indiana, Illinois, Iowa, and Nebraska. Values in the Upper Midwest are also very strong with sales reaching $10,000 per acre.

“Farms remained profitable in 2013 despite lower commodity prices, in part due to reductions in fertilizer expenses,” said Dickhut. “This is prompting farm owners to continue buying premium land to expand their operations. Interest in average to medium quality land has waned, slow ing activity for such property.”

Prices for pasture land have increased in places like Nebraska as Texas livestock producers transplanted herds due to recent drought. As regions in Texas continue to recover from drought, land values there are forecast to rise 5% to 7%, according to Dickhut. A price drop of 40% for sugar beets has impacted land values in the Northern Region (North Dakota/South Dakota/western Minnesota). Income reduction of nearly $350 per acre in some cases is taking some land buyers out of the market. Despite this pressure, values are fairly stable in this area, Dickhut said.

Farmers continue to be the primary land buyers. Dickhut reports that investor interest in land has been more guarded as many are not willing to pay high prices without a guaranteed strong return. Recent success in the stock market is generating interest in alternative investments, pushing outside investors to choices besides land. “The market for farmland overall remains strong, particularly for quality land even though buyers are getting more cautious,” said Dickhut. “The impact of changes in commodity prices, expenses, and interest rates will all play into year-end results.”

Kansas and Oklahoma

The land market for high quality cropland remains strong throughout the High Plains, however values have tapered off slightly with reductions of 8% to 10% in some cases, according to Brock Thurman, AFM, Farmers Na tional Company area vice president, Kiowa, Kansas. “Drought challenges have subsided, which is helping to stabilize any further reduction in values,” said Thurman. “Trends in the south central region are mirroring national trends overall, with comparable activity.”

Looking into 2014 for this region, Thurman predicts cropland will remain steady or see potential reductions of 10% in value. Current auction levels remain extremely strong and are forecast to stay at a similar level into early 2014. Prices for irrigated high quality cropland in the area are variable but range between $4,000 and $6,000 per acre, while the range for non- irrigated land is $3,000 to $6,000.

Iowa and Minnesota:

Demand for high quality farmland continues but prices have leveled somewhat in the North Central Region including Iowa, Missouri, Minnesota and South Dakota, according to Sam Kain, national sales manager for Farmers National Company, Des Moines, Iowa. “ autious and selective buyers are still on the lookout for quality land, and willing to pay top dollar when they find it,” said Kain.

Land prices moving into 2014 will likely be impacted by the looming ethanol mandate, which could drop values based on commodity prices and the demand for land to support livestock in this area which could boost values. “It’s a real balancing act as we move forward,” said Kain. “Values are still relatively strong, but market factors could pull them either way.”

Auction activity in 2013 was extremely high in this region, according to Farmers National Company numbers. The company’s national auction transactions reached 337 in the 2012-2013 fiscal year, while the Iowa market alone saw 120 auctions in 2013. The majority of purchases are going to farmers, but investors seem to be stepping back into the marketplace. In Iowa, top quality land is selling at more than $12,000 per acre, Minnesota values are reaching $10,000 per acre, and values in eastern South Dakota have reached more than $ 9,000 in many areas.

North Dakota, Northern South Dakota and West rn Minnesota

Buyers in the area covering North Dakota, northern South Dakota and western Minnesota continue to seek out average to high quality land for purchase, according to Terry Longtin, area vice president and area sales manager, Grand Forks, N.D. Sales levels remain fairly steady and have leveled slightly as compared to last year at this time. While demand in this area remains fairly strong, there are pockets of decline close to 10%, according to Longtin. Overall sellers are still happy with price levels which remain historically high. Decline in profitability for sugar beet operations is fueling some reduction in cash flow for farmers in this area. While this is taking some potential buyers out of the market, Longtin forecasts land values will hold in the region. “Sugar beets income is down about 40% and growers lost quite a bit of money last year, which is putting some pressure on the market,” said Longtin.

Transaction levels should maintain near or at current levels into 2014, according to Longtin. However, the auction transaction numbers are projected to slide downward as privately negotiated sales are beginning to make a strong comeback. Average to good quality land in the area is selling in the $4,000 to $7,000 range per acre, while excellent land is in the $8,000- to $9,000-per-acre range. Top land in South Dakota is pulling up to $9,000 per acre, while North Dakota is coming in at $8,000 and Minnesota at $10,000.

Colorado, South Dakota, Nebraska and Wyoming

High quality land is still in strong demand for the wide region covering Colorado, South Dakota, Nebraska and Wyoming. While values have not increased significantly, they are still at a steady high level says JD Maxson, area sales manager, North Platte, Nebraska. While demand from both investors and farmer owner/operators is high, farmers are the ones paying top prices and targeting premium pieces of land. Auction numbers in this region continue to be strong, prompting sellers to net top sales prices, according to Maxson. “Farmers are buying land while we are seeing a trend here of investors going elsewhere,” said Maxson. “Some investors are just reluctant to pay the higher prices they had in the past. Continued lower interest rates are still helping to keep sales activity high. However, commodity prices and the stock market’s positive performance are impacting land activity.”

Maxson reports prices overall are plateauing for high quality land, and average to medium ground is not peaking investor interest. The recent drought in Texas has been a major factor in driving grazing land prices up in Nebraska /South Dakota, as ranchers were relocating herds to these regions. As herds are being moved back south, grassland prices will likely adjust. Prices in these regions are ranging from $4,500 to $12 ,000 per acre for high quality tillable acres, with location, soils and topography dictating price. The range varies from west to east as well as by water availability and type of irrigation.

Farmland in Eastern Nebraska is quite varied ranging from top quality cropland, to mixed use properties to pasture farms. Buyers are being more cautious when purchasing farmland as they look for good quality land at a good price. Average to below-average type farms are not being sought out by buyers and prices have slipped off the recent highs that have been occurred in the marketplace. Good quality farms have also seen a decline from the recent strong escalation in prices that has been happening over the past seven years. Therefore, there is a wide range of land values from $4,500 per acre to $10,000 per acre depending on quality and if irrigated.

Illinois, Indiana, Ohio , Southern Michigan, Eastern Kentucky and Eastern Missouri

Quality farmland in the East Central region continues to see moderate to steady land values, as supplies are still limited and demand strong, according to Roger Hayworth, area sales manager, Lafayette, Indiana. This region has seen a recent flurry of activity heading into 2014, tempered by some conservative trends as buyers feel a softening of the market. “As we move into mid-year I feel we will see activity being stable to slightly lower,” said Hayworth. “The first quarter will be very active based on our year-end interest. This could subside later this year if interest rates rise and commodity prices weaken.”

With commodity market prices dropping, there has been some resistance at auctions. However, sales still remain steady with active auction buyers, said Hayworth. “There is still pent-up demand for quality land within the cash-rich farming community.” Larger parcels/tracts of land are coming on the market, with sizes in the East Central region ranging from 350 to 900 acres or more. Owner operators are seeking out these sections to expand farms. Top prices in the region can be seen in Illinois at $13,0 00 per acre on average for high quality land. These levels are followed by Indiana showing values up to $11,1 00 per acre, and Ohio, which has reached $8,400 per acre.

Arkansas, Mississippi, Missouri and Texas

Activity in the Southern region overall remains brisk, fueled by low supply and continued high demand that was seen in 2013. Quality land for sale is moving quickly says Mike Lansford, area vice president for the southern region, Fort Worth, Texas. However, some areas within the region, such as central/southern Arkansas and central Mississippi have seen more stable activity and values. Overall, Texas has seen an increase in land sale activity and a slight increase in land values over the past year, said Lansford.

The wide variety of geographic regions in the state has led to some variance. Recovery from the drought has minimized the negative impact on values in the state to some extent. “We anticipate land values to increase 5% to 7% on average across the state in 2014,” said Lansford. “Quality is still king no matter what the land classification.” Buyers for productive farms are still available. Prices for top farmland are averaging $5,000 per acre in Arkansas, $3,600 per acre in Tennessee, $3,500 per acre in Texas and $5,000 per acre in Mississippi.

Farmers National Company, an employee-owned company, has sold more than 3,500 farms and more than $2.37 billion of real estate during the last five years. Farmers National Company currently manages more than 4,700 farms in 24 states.

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

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