This recent auction near Clemons, Iowa, in Marshall County caught our eye because of its selling price and the number of acres involved. It featured a total of 245 acres and 220 acres of tillable cropland. The offering also included a small grain bin along with a farmstead featuring a farmhouse, pole building and brick barn. The property was offered in three tracts with the farmstead included in a 13-acre piece. Tract 1 was 80 acres with a CSR (Corn Suitability Rating with 100 = optimum) of 77.2. Tract 2 was 152 acres with a CSR of 74.2. Tract 2, the 13-acre farmstead, carried a 64.9 CSR on tillable ground. The total 245 acres featured an average CSR of 74.7 compared to the county average of 75.9. Subtracting the 13-acre farmstead raises the CSR on the remaining 232 acres to 75.3.
Now this is what made the auction interesting. The entire 245 acres sold as a single unit for an average price of $10,250 an acre. We understand an area investor repositioning 1031 money made the purchase.
A few points: 1) The price reflects an average of $137 per CSR point. At its peak, the central Iowa market reached close to $160 per CSR point. The decline between that high of a year ago and the sale is about 14%. We have seen differences of as much as 25% from the early 2013 highs and late-2013 prices. 2) It was a large tract. More recently we have seen a slight bounce in demand for smaller tracts, 40 to 80 acres, because the size of the purchase check is more manageable for buyers. 3) The influence of the 1031 money no doubt affected the outcome as 1031 transactions have a limited window of opportunity or else the tax deferral benefits are lost. However, at least one person had to bid against the 1031 buyer, which reflects continuing residual demand for quality farmland.
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