The latest farmland value survey of high-quality ground shows that prices have leveled off and even declined in many geographies. Location and quality of land continue to be the biggest drivers of prices, according to Randy Dickhut, vice president of real estate operations of Farmers National Company.
FNC just completed a survey across 17 states and saw slight declines from in high-quality land value from 2014 in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Dakota. Prices were flat in Arkansas and Texas, and the only states that saw an increase in values were Mississippi, Tennessee and Washington (irrigated).
Dickhut notes that a lower supply of land for sale plus continued demand has kept prices largely stable for high-quality acres.
“While lower grade land has seen drops in value near 15% from recent highs, top-quality crop and grazing land still bring solid prices as owner-operators and investors seek to expand their operations with the most productive land,” he says. “Land is viewed as a long-term asset, and owners consider agricultural land a stable investment in a changing world.”
Investors are still popping up to purchase land, but they are being more cautious in their purchase decisions, Dickhut adds.
“Buyers are being more realistic when considering land purchases, which has reduced the fervor of rapidly escalating prices seen at land auction in recent years,” he says. “Owner-operators continue to be the main purchasers of agricultural land, comprising nearly 90% of buyers in many areas.”
Mike Lansford, FNC area sales manager for the southern region, says the South has seen quality land for sale continue to move quickly.
“Quality is still king, no matter what the land classification,” he says. “Top-quality properties in all classes will continue to capture good prices. Buyers for top producing farms are still available.”
And while land values are down in many Midwest states, Sam Kain, FNC sales manager for Iowa and Minnesota, says it’s still hard to get a handle on changes in land values at the local level. In many instances, farm owners who want a particular property up for sale realize they may not get another chance in their lifetime to acquire it.
Dickhut says that record grain harvest should keep farmland values mostly stable – at least for the time being.
“As we forecast further out into late 2015 and 2016, circumstances could shift,” he says.
Factors to watch for include the potential for rising interest rates, plus long-term world demand for water, food, fuel and fiber.
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