The average acre of cropland is worth $4,090, a level unchanged from 2016 and the third highest on record, according to USDA’s 2017 Land Values Summary. Pasture values increased by $20 per acre from 2016 values to a national average of $1,350. That’s the highest value for pasture land USDA has recorded.
On a regional basis, the Southern Plains states of Texas and Oklahoma saw the largest increase in cropland values—6%—while the Northern Plains states of Kansas, Nebraska and the Dakotas dropped 4.4% from year-ago levels.
More than half of the 22 states with irrigated cropland saw values increase. Texas irrigated cropland jumped 7.3% from 2016, followed by a 5.9% increase in Louisiana. Kansas and Nebraska irrigated cropland each fell 5% from year-ago levels.
Pasture values in the Delta region, which includes Arkansas, Louisiana and Mississippi, showed the highest increase of nearly 3% above year-ago levels, while the Corn Belt saw the largest decrease of 1.7% from 2016 values.
Price Strength? The sentiment around farmland values seems to be slowly turning from its negative bias based on other farmland reports (see the latest from four Federal Reserve banks on pages 4 and 5).
According to Creighton University’s Rural Mainstreet Index for
August 2017, the farmland index rose to 43, which is up from last month’s 36.6 and the highest farmland and ranchland-price index since July 2014. But August’s index marks the 45th straight month it has fallen below growth-neutral 50.
On average, bank CEOs in the 10-state Midwest region expect farmland prices to decline by another 3.5% over the next year. This is an improvement from this time last year, when bank CEOs projected a nearly 7% decline, on average.
One would assume multiple years of low commodity prices would negatively affect land values, notes Brad Hayes, an appraiser for Peoples Company in Clive, Iowa. That might have been true several years ago, but it’s no longer the case.
“We saw land values trend down from 2013 through 2016; however, it appears land values bottomed out in the first quarter of 2016 and have seen an upward trend through 2017,” Hayes explains.
The number of farms for sale in Iowa remains historically low, judging by the number of farms that have sold publicly in the state, Hayes says. Meanwhile, buyers with an abundance of capital are pursuing these land assets.
Heading into the fourth quarter, Hayes predicts, the number of farms for sale will continue to increase.
“This is generally the busiest time of the year for public land sales,” he says. “During 2015 and 2016, our team saw an upward trend in land values during the fourth quarter. That said, the ag market saw record yields the past two years, which provided some optimism in the land market. We’ll wait and see if 2017 yields provide the same optimism.”
Sales Window. The farmland market appears to be stabilizing, says Doug Hensley, president of real estate services for Hertz Farm Management in Nevada, Iowa. His firm is seeing strong buying interest from both farmers and investors, which could provide a selling opportunity for interested landowners.
“If you’re considering making a sale, now is the time of year to begin making those plans,” Hensley says. “We’re seeing more potential this fall for auctions compared to the last couple of years, especially for better-quality farms. Weaker soil types may still be better served by brokerage or private listing.”
For the next several months, Hayes says, landowners should keep an eye on several market influences that could inflate or deflate land values. These include drought conditions in the Upper Midwest, increasing interest rates, tight farmer profit margins and U.S. trade relationships.
For the rest of 2017 and into 2018, Hayes expects the farmland market will remain strong.
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