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April 2012 Archive for Your Precious Land

RSS By: Mike Walsten, Pro Farmer

Mike Walsten has covered major business trends in agriculture for more than 35 years.

Farmland Values Slip in Southeastern U.S.

Apr 27, 2012

Mike Walsten

The value of farmland in the Southeastern U.S. fell 1.3% during the fourth quarter of 2011 compared to both the previous quarter and also to a year earlier, states the Federal Reserve Bank of Richmond. The bank, which serves the Carolinas, District of Columbia, Maryland, Virginia and most of West Virginia, pegs the average value of district farmland at $3,221 an acre. Average farmland prices have held essentially flat since their peak in 2006.

Weather-reduced crop yields, high feed prices and continuing poor demand for nursery products and lumber due to the weak housing market are cited as reasons for the sideways to weaker trend in regional farmland values.

The survey found bankers positive about farmland price prospects for early 2012, however.

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

Bankers Survey Suggests Slowing in Farmland Prices

Apr 25, 2012

Mike Walsten

Farmland prices continue to rise but the pace of growth is slowing, according to Creighton University's April Rural Mainstreet Index. The Rural Mainstreet Index (RMI), which ranges between 0 and 100, declined to 57.1 in April from March’s strong 59.8. Creighton University economist Ernie Goss, who conducts the survey of rural bankers in approximately 200 rural communities with an average population of 1,300, says, “We are seeing some signs across the Rural Mainstreet economy that higher energy and fuel prices are slowing growth for areas dependent on agriculture.  Furthermore, somewhat slower global growth has negatively affected some portions of the rural and agriculturally dependent economy.” 

Farmland prices continue to increase according to bankers.  However, that growth slowed for April as the index (which also ranges from 0 to 100) slumped to 69.4 from 78.7 in March.  This is the 27th straight month the index has been above growth neutral. The farm equipment sales index rose to 62.4 from 61.5 in March.

“The Federal Reserve’s cheap money and low interest rate policies continue to support the agriculture sector, including farmland and farm equipment.  However, higher energy prices and somewhat slower global growth are taking some of the air out of the farm sector,” states Goss. 

This month bank CEOs were asked to estimate the share of farmland sold to nonfarm investors and the proportion of farmland sold for cash. Bankers indicated that more than one in five, or 21%, of sales were to nonfarm investors. Bankers also reported that approximately 29% of farmland sales were for cash.  

“It is clear that nonfarm investor interest in purchasing farmland is growing.  Furthermore, some land not previously used for farming is being converted to farmland,” says Goss.

Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.

In addition, click here for an in-depth article on what's ahead for farmland values written by Debbie Carlson and published in Barron's.

Drop me an email at landowner@profarmer.com if interested in seeing a copy of the LandOwner newsletter.

Texas Rural Land Up 3% in 2011, Powered by Strong Farmland Demand

Apr 19, 2012

Mike Walsten

The value of Texas rural land rose 3% in 2011, according to an analysis of real estate sales conducted by the state's Real Estate Center (REC). The analysis found the average value of an acre of rural Texas land reached $2,150, up from $2,091 in 2010 but down from the peak of $2,247 an acre posted in 2008. On an inflation-adjusted basis, the average value of an acre of Texas rural land rose 2% to $396, up 2% from 2010 but down from 2008's peak of $425 an acre.

"The real story is the low volume of transactions," said the REC Research Economist Dr. Charles Gilliland. Speaking at REC's annual Outlook for Texas Land Markets Conference in San Antonio, Gilliland stated: "Price seems to be hanging in there but volume of activity is no where near what it once was."

The total number of transactions was 4,520, down from 2010's 4,747 sales. However, 2011's sales volume was higher than 2009's 4,045 but down from 2008's 5,725 and 2007's 7,167. "The sales volume levels of the past three years more resembles the volume levels of the 1990s," he observed.

The total number of acres transferred in 2011 was 926,101, down from 2010's 1,045,408 but up from 2008's 908,101 acres. These figures are well short of the 45-year average of 1,691,987 acres annually. For comparison, more than 3,000,000 acres changed hands in 2005. Besides the current three-year period, the only other time the number of acres transferred dipped below 1,000,000 acres was in 1982.

Texas is a very large state with much diversity in land types and geography. That diversity held true in 2011 as the heavy cropland area in the Panhandle and South Plains region posted a 20% surge -- driven primarily by strong demand for irrigated cropland. The Far West region saw an 18% gain -- again driven by strong demand for irrigated cropland, cropland with irrigation potential and oil company demand for mineral-classified land. The West region reported a rise of 7% followed by a gain of 4% for the Gulf Coast and Brazos Bottom and a rise of 3% for the South region. The Austin-Waco-Hill Country region reported a decline of 2% and the North East region listed a decrease of 3%.

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

Canada Farmland Rises 7% in Last Half of 2011

Apr 17, 2012

Mike Walsten

The value of Canadian farmland rose 6.9% the second half 2011, according to a semi-annual survey conducted by Farm Credit Canada (FCC), the nation's leading agricultural lender. That increase followed gains of 7.4% and 2.1% in the two previous reporting periods. In 1985, FCC established a system with 245 benchmark farm properties to monitor variations in bare farmland values across Canada. Since 1990, the benchmark properties have been appraised semi-annually in January and July. These selected parcels represent the most prevalent classes of agriculture soil in each part of the country. Changes in value are weighted based on cultivated farmland per area. FCC appraisers estimate market value using recent comparable sales. These sales must be arm’s-length transactions. Once sales are selected, they are reviewed, analyzed and adjusted to the benchmark properties.

The January update found farmland values were stable or increased in all provinces. Saskatchewan, with 40% of Canada's arable land, posted the strongest percentage increase at 10.1%. Ontario posted the second-strongest increase at 7.2%. Alberta and Quebec posted 4.5% and 4.3% gains, respectively. Nova Scotia registered a 3.2% rise while Manitoba logged a 1.9% increase. Price Edward Island listed a 1.5% gain, New Brunswick posted a 1.3% rise and British Columbia reported a 0.2% rise.

The strongest increase posted in any semi-annual review was 7.7% in 2008. The last decrease reported by the valuation update was 0.6% in 2000.

 

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

Economists and Lenders See Surge in Farmland Values Easing

Apr 17, 2012

Mike Walsten

Economists and lenders speaking at a recent forum on farmland values expressed the belief profit margins would slow the rise in farmland prices but not send values spiraling lower -- a view we've shared with LandOwner subscribers since the first of the year.

Alan Bjerga of the media company Bloomberg reported: "Declining profit indicates that farmers, who dominate rural land purchases, probably won’t bid prices higher, Ken Keegan, the chief risk officer at Farm Credit Services in Omaha, Nebraska, said today at a forum in Washington. Low interest rates and agricultural debt make a plunge from a record rally in farmland unlikely, he said." Click here for Bjerga's report.

Charles Abbott for the media company Reuters wrote: "The surge in farmland prices, which doubled in a decade amid an agricultural boom, should cool in the coming year as prices bump against the ability of cropland to pay for itself, said a panel of experts on Wednesday." Click here for Abbott's report.

If interested in what LandOwner subscribers read in our January 12, 2012 issue, just drop me an email at landowner@profarmer.com and please mention "January outlook issue" in your email.

Texas Irrigated Cropland Sees 9% Annual Gain

Apr 10, 2012

Mike Walsten

The value of irrigated Texas cropland rose 9% on an annual basis through the first quarter of 2012, according to a survey conducted by the Federal Reserve Bank of Dallas. The quarterly survey found the value of dryland cropland was nearly unchanged while the value of ranchland was slightly weaker.

The Dallas Fed bank serves all of Texas as well as as southern New Mexico and northern Louisiana. On a district-wide basis, the survey found the value of irrigated cropland rose 8.8% on an annual basis and 1.8% versus the fourth quarter of 2011. The survey pegged the value of an average acre of irrigated cropland in the district at $1,843 an acre. The survey also found the value of dryland cropland within the district rose 0.8% annually and 5.3% on a quarter-v-quarter basis to an average district-wide value of $1,440 an acre. The survey pegged an average acre of district ranchland at $1,463 an acre, down 0.6% on an annual basis and down 0.9% on a quarterly basis.

For Texas, the survey pegged the value of an acre of irrigated cropland at $1,700, up 8.7% annually and 3.2% quarterly. It said an average acre of Texas dryland cropland was $1,467, up 0.6% annually and 5.2% quarterly. The value of an acre of Texas ranchland was placed at $1,752, down 0.7% annually and down 1% quarterly.

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

18% Surge in North Dakota Cropland Values

Apr 05, 2012

Mike Walsten

The value of North Dakota cropland jumped 18% on an annual basis, according to a survey conducted by the North Dakota office of the National Agricultural Statistics Service in January, 2012. “By any measure, it has been a historical run for farmland values,” says Andy Swenson, North Dakota State University Extension Service farm management specialist. “Since 2003, cropland values have increased at an average annual rate of about 13%, with the sharpest increases occurring since 2007. This surpasses an eight-year period of strong growth in the 1940s. The strongest run up in cropland values during the past 100 years was a nine-year period (1973 through 1981), which averaged 18% annually. However, land values then dropped 40% from 1981 through 1988. It was 24 years (2005) before values again reached those that were achieved in 1981.”

The prime drivers behind this strong upswing in land values are the usual suspects -- very profitable crop production and low interest rates.

The largest increase in cropland values was 28% in the southeastern region (to $2,120), followed by increases of 22% (to $2,195 per acre) in the northern Red River Valley, and 17% to 19% for the east-central (to $1,425), southern Red River Valley (to $3,083) and the northeastern regions (to $1,246). Cropland values increased 15% in the south-central region to $1,017. The smallest increases, 12% to 13%, occurred in the northwestern region (to $666), southwestern region (to $816) and north-central region (to $1,032).

“The survey indicated that land rents, as typical, did not change as much in percentage as land values,” Swenson says. “On average, cropland rents increased about 6%. This was still a strong increase from a historical perspective.”

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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