Sep 17, 2014
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Your Precious Land

RSS By: Mike Walsten, Pro Farmer

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

REALTOR® Survey: Individuals/Families Continue to Invest in Land

Sep 03, 2014

Mike Walsten

Individuals and families continue to be the primary investors in farmland, according to the 2014 Land Markets Survey, conducted jointly by the REALTORS® Land Institute and National Association of REALTORS®. The survey found individuals and families accounted for 58% of all buyers in land sales transactions nationally. In addition, the survey also revealed 17% of land purchasers are corporations/partnerships, 17% investors, and 10% expansion farmers. The REALTORS® Land Institute is the professional membership organization for real estate practitioners who specialize in land transactions.

The 2014 Land Market Survey is the first of many biannual reports aimed to develop accurate information on current trends in the land markets and on the general state of land sales. The results are representative of over 625 land professional respondents from across the United States. According to the survey, 43% of the purchases where individuals/families were buyers were purposed for farm and ranch (24% agriculture and 17% ranch) and 31% for recreation. Of those surveyed, expansion farmers purchased 98% of land for farm and ranch (85% agriculture and 13% ranch). Investors purchased a diversified portfolio of land (21% agriculture, 20% timber, 17% development, 14% commercial). Of the 17% of land purchased by corporations, development land accounted for 30%, commercial land accounted for 26%, and 17% accounted for timber.

Terri Jensen, ALC Advanced, 2014 Institute National President-Elect of REALTORS® Land Institute, states the findings "follow my experience in that 70% to 85% of land buyers are expansion farmers/individuals/families; the balance are investors and/or 1031 exchange buyers." The results appropriately correlate to the findings that responding land professionals across the United States primarily focus their practices in agriculture (69%) and recreation (59%).

The market and growth for land is steady. The survey recorded that over the past twelve months, ending in July 2014, the median land price change is growth of 4%. According to Jensen, "Land prices are noting stable versus rapidly rising prices with decreases noted in some areas. Most decreases were less than 10% of responses and reflected 0% to 10% decreases and increases. The 0% to 5% increase in 50-plus percent of responses note the change to stability versus rapid changes up or down."

The 2014 Land Market Survey was based on data collected in July 2014. The survey was emailed to 1,000 REALTORS® Land Institute members and approximately 9,500 nonmembers and generated 629 usable responses.

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

 

Softer Farmland Values Seen In Illinois

Aug 27, 2014

Mike Walsten

Illinois farmland values softened in the first half of 2014, according to a survey of farmland real estate professionals conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers. Prices generally edged 2% to 4.1% lower, according to the Midyear Land Values Snapshot Survey conducted by the professional group.

The decline in values is for the first half of 2014 and survey respondents expect the trend in prices paid to be either stable or declining modestly over the next year, says Dale Aupperle, Heartland Ag Group, LTD., Forsyth, IL. Aupperle is overall chair of the survey. He explained that survey responded indicated that during the first half of 2014 land values decreased by 2% for excellent-quality farmland; decreased by 3.7% for good-quality land; dropped by 4.2 % for average-quality land, and by 6% for fair quality farmland.

In a normal year, excellent-quality farmland averages over 190 bu. of corn per acre, good-quality farmland averages between 170 and 190 bu. per acre, average-quality farmland averages between 150 and 170 bu. per acre, and fair-quality farmland averages below 150 bu. per acre. On July 1, 2014, farmland prices averaged $13,000 for excellent-quality farmland, $10,700 for good-quality farmland, $8,600 for average-quality farmland, and $6,700 for fair-quality farmland. This compares to $13,200, $11,200, $9,000, and $8,300 prices respectively for the same time period in 2013, said Gary Schnitkey, Ph.D., University of Illinois College of ACES, who conducts and compiles the twice-a-year surveys.

Schnitkey adds 64% of those responding indicate less farmland was sold in the first half of 2014 as compared to a year prior. "Participants were evenly divided on expectations for volume in the second half of 2014: 33% expect more land being offered for sale in the second half than last year while 38% expect the same amount of land and 29% expect less."

Farmers still leading buyers. "Local farmers are still the primary buyers," Schnitkey says, consisting of 71% of all buyers. Anticipating the future, over half (55%) expect land prices to decrease between 1% and 5% in the next year while a modest 29% expect the decrease to be larger -- between 6% and 10%.

"When you look at what is causing this softening of prices, there are a number of factors that come in to play," Aupperle explains. "The most dramatic is the drop we’ve seen in commodity prices."

He says most respondents expect corn prices to average $3.75 per bu. for the 2014 crop year. "This translates into lower returns on a per-acre basis and makes it more difficult to justify higher prices being paid for the land. Couple that with an expectation of interest rates to possibly rise over the next year, higher inputs costs and the potential for very high costs for propane this winter, and there has been a dampening of attitude."

He also expects there will be drops in cash rents going into 2015 with a decrease of $33 per acre being forecast by the survey respondents.

"This softening in prices has been expected for some time and this is not a doom and gloom scenario," Aupperle warned. "Land prices are still in ranges that have never been seen before and mindful land owners and operators can still be profitable with the correct management programs in place. Some of survey respondents indicated a one-in-10 chance for large price declines over the next five years, but 31% expect that range to be only a negative 1% to 5% per year."

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

 

Fed Banks Find Stable Farmland Values First-half 2014

Aug 14, 2014

Mike Walsten

Farmland values tended to stabilize the first half of 2014, following weakness at the start of the year, according to recent surveys conducted by the Federal Reserve Banks of Chicago and Kansas City. The exception is in the southern Corn Belt and Mid-South, where values are weaker. The Chicago Federal Reserve reports farmland values rose 2% during the second quarter of 2014. The result of that firming in values put the value of district farmland in the central Corn Belt at 3% higher than a year earlier.

The Kansas City Federal Reserve says the value of both dryland and irrigated cropland rose slightly less than 1% during the second quarter. That results in both categories of crop marking a 6% annual increase. The bright spot is ranchland values, which rose more than 2% in the second quarter across the Central and Southern Plains. On an annual basis, district ranchland values are up 9%.

The exception is the St. Louis Federal Reserve Bank, which indicates the value of farmland is down 6.7% from the high posted in the fourth quarter of 2013. Pastureland values are down 7.5% from fourth-quarter 2013, as well.

These surveys give land watchers a view of the pulse of land values through midyear. The rise in commodity prices this spring tended to support farmland prices, with the exception of the southern Corn Belt and Mid-South. Going forward demand will obviously be dampened by the low commodity prices but strong yield prospects will tend to soften the weakening in demand.

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

 

USDA: U.S. Farmland Values Rise 8.1% Versus Year Earlier

Aug 01, 2014

Mike Walsten

The value of U.S. farmland rose 8.1% as of January 2014, according to USDA's Land Values Summary released this afternoon. The survey shows a land market that was still rising as of early 2014 before the reality of lower corn, soybean and wheat prices resulted in some weakening in land values this year.

USDA pegs the average value of an acre of U.S. farmland, including buildings as well as real estate, reached an average price of $2,950 an acre. The Northern Plains report the strongest increase with a 16.3% rise while the Southeast regions reports the smallest gain at just 1.1%. The highest farm real estate values are in the Corn Belt region at $6,370 per acre while the Mountain region had the lowest farm real estate value at $1,070 per acre.

The value of U. S. cropland rose by $290 per acre, 7.6%, to $4,100 per acre from the previous year. In the Northern Plains region, the average cropland value increased 13.6% from the previous year. However, in the Mountain region, cropland values decreased by 5.1%.

U.S. pasture values increased to $1,300 per acre, or 11.1%, above 2013. The Southeast region had the smallest percentage increase in pasture value, 0.5% above 2013. The Northern Plains had the highest increase at 26.5%.

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

 

Negotiating Down Cash Rent for 2015

Jul 23, 2014

Mike Walsten

The subject of cash rents between landowner and tenants is always a touchy one, frequently with lots of emotion tied to the conversation as well. With this year's crop margins cut dramatically from recent years and prospects of potentially even tighter margins for 2015, conversations between high-rent-paying operators and landowners may become more frequent. Traditionally, rents are "sticky," slow to rise when margins widen and slow to decline with margins compress. Work by former Purdue Economist Dr. Brent Gloy, which we cover thoroughly in our July 24 issue of LandOwner, shows rents declined only nine times in the 38 years from 1976 to 2013. Of those nine declines, five were greater than 5% but only one exceeded 10%.

Dr. Gary Schnitkey at the University of Illinois highlights some of the keys to consider when looking ahead to cash rent negotiations for 2015. There's interesting analysis for both opertors and landowners in his report. Plus, he points out how a variable cash lease can help solve some of the issues of a fixed cash rent -- except for one. That's the landowner's desire to have a known revenue for planning purposes.

Click here to read the full report by Dr. Schnitkey.

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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