Lower commodity prices have in turn pushed down land prices in many areas. But Randy Dickhut, senior vice president of real estate operations for Farmers National Company, says while some geographies continue to decline, other areas are stabilizing.
Dickhut says multiple factors are at play.
“This winter, questions abound as to the direction of commodity prices, interest rates, inflation, challenges in the world economy, weather and U.S. tax law,” he says. “Buyers of ag land are asking if it is an opportune time to make a purchase of a farm or ranch, while sellers are asking if the market dynamics are indicating that it is good time to sell land.”
Foreign trade policy and tax law in particular will be closely monitored as the Trump administration begins, Dickhut adds.
“Potential changes in tax laws could affect estate taxation and capital gains rules that in turn influence buying and selling decisions,” he says.
Area sales managers with Farmers National Company have observed the following:
Michigan, Ohio, Indiana, Illinois, Missouri, Kentucky, Tennessee, Arkansas, Mississippi
High-quality land values have held steady in this area, but medium and low-quality ground continues to slip, according to area sales manager Roger Hayworth. More private transactions of land occurred in 2016, he says, but the majority (60%) still happened via auction. More than 95% of auctions resulted in same-day or same-week sale of the land being sold, he says.
Hayworth predicts land values will remain stable or trend slightly lower in 2017.
Area sales manager Brock Thurman says top-quality land has held steady, with medium quality land down about 5% and poor-quality land hard to sell at all.
“It could be down 50% from the top when it’s in poor condition and not in a good location,” he says. “Location is key.”
Thurman says he has seen a “new wave of interest” from investors, and farmers are still buying land if it is close by or otherwise proves a good addition to their current operation.
Values for farm and ranch land has remained steady in the Lone Star State, according to national sales manager Dan Hatfield, although timber ground is where the real interest lies, he says.
“Interest in timber properties has been good,” he says. “Investors are the biggest buyers of timberland. Local farmers and ranchers, along with investors, are the biggest buyers of non-timberland.”
Top-quality land has held steady or decreased by as much as 5%. Medium ground, meantime, has decreased by 5% and low-quality land has decreased by 10%. Almost all buyers (85%) are local farmers, with the remaining 15% of sales going to outside investors.
“The land market has been stronger since harvest was completed, which I attribute to above average yields,” says Sam Kain, national sales manager. “For 2017, a lot will depend upon how much land comes on the market. Current commodity prices indicate land values should be trending downward, but if we continue to see so few farms come on the market, prices will stay steady.”
Expect flat land values in the first half of 2017 unless grain and commodity prices improve, according to area sales manager JD Maxson. High-quality ground are selling best through the auction process, he says. They tend to sell within a couple of days if priced for the market, he says.
On the downside, some of these sales were forced due to financial constraints, Maxson says.
“However, lenders have been meeting with the producers after harvest,” he adds. “We certainly could see an 80-acre farm or short-quarter come on the market to generate operating capital for 2017.”
North Dakota, South Dakota, Minnesota
The biggest drops in land prices are behind farmers in these states, but they might not quite be through, according to area sales manager Brian Mohr.
“I look for only a 5% to 10% decline in land values in the Northern Plains this year,” he says.
Private listings and sealed bid auctions have worked best in North Dakota and Minnesota, while public auctions prove more success in South Dakota, Mohr observes. Most private listings stay on the market for less than three months, he says. Most sellers are retiring farmers and family trusts, while buyers tend to be farmers looking for expansion opportunities.
Land values for top-quality and medium-quality ground have held steady, sales interest remains strong and volume is stable, according to real estate broker Flo Sayre. Private listings tend to stay on the market anywhere from 10 to 180 days, Sayre says.