Five-Year Decline in Farmland Sales Volume

February 9, 2018 05:00 AM
 
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The number of farms sold in 2017 declined for the fifth year in a row, according to data from Farm Credit Services of America (FCSAmerica) and Frontier Farm Credit. The lenders report the number of sales in their service area declined by about 270, or 7.5%, compared to 2016. FCSAmerica serves Iowa, Nebraska, South Dakota and Wyoming. Frontier Farm Credit serves eastern Kansas.

The data, generated by the lenders’ appraisal teams, confirms recent surveys pointing to a continuing downturn in the number of farm properties on the market. 

At 3,334 completed sales, 2017’s sales volume is the lowest since at least 2009—the extent of our historical data. This year’s total is down  nearly 2,600 from the peak of 5,925 sales in 2012—a decline of 44%.

Public land auctions in Iowa
increased 2% from 2016, while activity in the other areas served decreased an average of 22% from a year ago, the lenders report.

The number of “no sales” rose to 137 in 2017—a rather small increase from the 131 “no sales” reported the previous year. This year’s total of “no sales” is the second lowest since 2012 when 130 were recorded; 2016’s 131 “no sales” is the lowest.

 

The data, generated by the lenders’ appraisal teams, confirms recent surveys pointing to a continuing downturn in the number of farm properties on the market.

While we don’t have similar data for other regions of the Midwest, anecdotal information from surveys and real estate brokers point to fewer properties being offered for sale.

That certainly makes sense. When prices begin to edge lower, landowners who might be contemplating a sale frequently decide to wait, hoping for a rebound in prices. Only those properties that absolutely must be sold, usually for estate settlement purposes, move to the market.

The lack of supply has been key in supporting values during this correction in prices. And it is what makes this correction different from the plunge in farmland values seen in the 1980s. That price dive was due to a collapse in farm balance sheets. Incomes were cut sharply and asset values, primarily farmland, also plunged. That combination forced the sale of farm properties onto a market of unwilling buyers.

Forced sales have been largely absent, so far. And the quality farms that have come to the market have been relatively well received. Poor-quality farms have seen their share of weak demand, frequently requiring a price discount and a long marketing period. The result has been a relatively manageable decline in farmland values.

Whether or not this continues remains the obvious question. We are aware some properties might soon come to the market due to eroding working capital. Many of these might be offered as “sale and leaseback.”

While such offerings could require a long marketing period, they avoid “dumping” farmland on a market that is short of buyers. That can help support prices even as supplies rise. In addition, such “slightly” distressed farm sales will likely be regionalized. That would tend to prevent any weakness prompted by a small boost in supply to become a depressing factor on prices across the broader Midwestern and Plains markets.  

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Comments

 
Spell Check

C.K
bad axe, MI
2/9/2018 06:06 AM
 

  Just remember you would have to pay $227,700.00 for each and every of the 300 million acres of row crop in the USA to pay off the 70 trillion in credit market debt of the USA. AuctionTime.com last week had a no sale on 220 acres in South Dakota. If you drove up in down any road in rural America offering $20,000.00 an acre you could buy a lot of farmland everyday. Supply doesn't mean anything it's all about the credit market debt 70 trillion, 14 times high than in 1980. Lots of fiat money buys lots of things.

 
 
Craig
Kearney, NE
2/9/2018 06:38 AM
 

  The main difference between now and the 1980's is interest rates. If we had interest rates like then, land values would be plummeting because today's commodity prices couldn't support current debt loads with higher rates. The "extend and pretend" would end quickly at higher interest rates. The debt balloon is simply getting larger all the time, making the inevitable crash all the worse. We can not "compete in the global market place" with our expensive overhead. For us to compete, everything that goes into producing a crop in America needs to readjust lower, and at some point it will. High priced land hurts Ag, it does not help us.

 
 
Jim Rothermich
west Des Moines, IA
2/9/2018 01:36 PM
 

  Land Auction, 02/09/18, Benton County, Iowa; 176 acres- $14,300/acre- almost all tillable- CSR2- 92. Farmer buyer- exceeded expectations between $2,500-$3,000/acre; farm was donated to the Greater Des Moines Community Foundation. One other farm auctioned day before for $13,500/acre with a farmer making the purchase.

 
 

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