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Land Values Soften

08:26AM Dec 06, 2014

Expand your land base with caution

There’s no denying corn below $4 will affect the price of land. But, by how much?

This year’s land sales have brought some mixed results so far, says Mike Walsten, editor of LandOwner newsletter. “You can find instances where there are no sales at auctions,” he says. “But, I’ve also seen top-quality ground bring new highs in an area where you have very aggressive farmers who happen to be cattle and pork producers. They have money right now, they need a place to put manure on the ground and they need more corn.”

Lower sale prices are an indication of an adjustment, but not necessarily a signal of a collapse similar to the 1980s land value crash. “The 1980s experienced a much more significant decline,” says James Mintert, director of the Center for Commercial Agriculture at Purdue University. “We had a greater number of negative factors influencing land prices in the 1980s than right now.” 

Walsten says two unexpected factors caused the 1980s collapse: a 40% reduction in farm incomes coupled with a doubling of interest rates. “This time, we’ve had more warning,” he notes.

Walsten and Mintert agree farmers should be cautious with land acquisitions, especially in the short term. “Unless you’re looking at a special situation, expanding an operation, a farm with very close proximity to headquarters, that kind of thing. I would be very cautious about investing in farmland this winter,” Mintert says.

Walsten suggests farmers avoid livestock-heavy areas because bidding could be more aggressive. Some areas outside of the Corn Belt still might prove lucrative, including Georgia and the Delta.