Sep 20, 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.

Shocker Cash Rent Auction -- Down 38%!

Sep 19, 2014

Mike Walsten

Southwest Iowa saw a shocking cash rent auction this week. According to people in attendance, the auction for a short quarter of county-owned farmland saw the resulting winning bid drop 38% from the prior lease. The land in question was located in Montgomery County carried an average CSR of 63 to 65. The county average CSR is 63.5 so the ground in question would be considered very average for the area.

The lease in question was a three-year lease. The prior lease was set at $367 an acre. The auction was a sealed-bid auction. The winning bid went for $227 -- a drop of $140 per acre! And the previous tenant got the bid! Interesting that the current tenant was willing to farm the ground only with a 38% discount.

Flooding and then drought have taken a toll on farmer attitudes in southwest Iowa. Both combined to result in the first wave of "no-sale" auctions in Iowa in July of 2013. And farmland values have been soft ever since. According to the Iowa State University annual cash rent survey, the average rental rate for average-quality ground in Montgomery County in 2014 was $252 an acre. So the old lease at $367 an acre was $115, 31%, above the 2013 average.

Market observers also feel the length of the lease was a factor. With profit margins looking severely squeezed at best and negative at worst for the next several years, farmers are reluctant to lock in a high rent for any extended period of time.

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

 

Iowa Farmland Values Post 3.4% Six-month Decline

Sep 17, 2014

Mike Walsten


The average value of an acre of Iowa farmland slipped 3.4% from March 1 to September 1, 2014, according to the semi-annual survey conducted by the Iowa Chapter of REALTORS Land Institute (RLI). Combining the 3.4% six-month decline with the 5.4% decrease reported in the six months preceding March 1 indicates a statewide average decrease of 8.8% for the year ending September 1.


While a decline on average state wide, not all areas saw decreases during the six-month period, reports Kyle Hansen, Hertz Real Estate Services, Nevada, and survey coordinator. "The September survey shows the southeast crop reporting district reporting an increase of 3.1% while the northeast district fell 6.5%," he states. The rise in the southeast is due to strong livestock profits and strong yields. The drop in the northeast is due to the extensive prevent-plant acreage that occurred in 2013 along with continuing delays in getting crops planted this year, he notes.  


The survey found an acre of high-quality Iowa cropland averaged $10,724 on Sept. 1, down 3.3% from Mar. 1. The value of an acre of medium-quality cropland averaged $8,076, according to the survey, down 2.8% from Mar. 1. The survey found an acre of low-quality cropland fell 4.3% from Mar. 1 to a statewide average of $5,200.


The survey found the value of pasture land was stable while timber land slipped when compared to six months earlier. The value of pasture rose 0.7% to $2,761 an acre while the value to timber slipped 1.5% to $2,235 an acre.


Factors contributing to the decrease in farmland values include, according to survey responses: lower commodity prices and rising interest rates. Positive factors sited included: lack of stable alternative investments, cash on hand and limited amount of land offered for sale.

 

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

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.

 

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