Farmland values are steady to weaker across the Midwest and steady across the Mid-South, according to Farmers National Company (FNC), the nation's largest farm and ranch real estate company. The firm's update of average farmland values shows values are generally weaker in Iowa and Minnesota compared to other states. The firm indicates values are down about 8% on average in Iowa and Minnesota. Meanwhile, the firm indicates values are down about 2% to 5% -- basically steady -- in Indiana, Illinois, Michigan, Missouri, Nebraska and Ohio. However, the firm reports declines of 10% to 11% in Kansas, South Dakota and North Dakota. The Mid-South reflects stable to higher farmland values, with Arkansas reportedly unchanged, Kentucky down 5%, Tennessee up 4% and Mississippi up 11%.
Location and quality of land continue to be main drivers of prices for a given tract of land, FNC reports. The lower supply of land for sale and the continued demand for agricultural land is maintaining general stability of the land market. “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,” says Randy Dickhut, AFM, Vice President of Real Estate Operations. FNC says the supply of land for sale is less than in the past few years as there is no tax policy change driving sales and landowners remain tight holders of the asset. “Land is viewed as a long term asset and owners consider agricultural land a stable investment in a changing world,” notes Dickhut.
Despite leveling or moderately decreasing land values overall, FNC has seen strong prices paid for specific properties within the last 60 days based on local competition and the desire for quality. According to Dickhut, farmland seldom comes up for sale in many locations, therefore local producers are willing to pay top dollar to grow their operation and asset base. Recent value adjustments in the land market still leave land values at historically high levels in the longer term view. Price softening is happening, but at different rates depending on the region, prices for major commodities in that region, and quality of the land.
Profitability from record crop incomes supported by insurance coverage, has kept farm operations in the black and producers interested in adding land. “Buyers are being more realistic when considering land purchases which has reduced the fervor of rapidly escalating prices seen at land auctions in recent years,” states Dickhut. “Owner operators continue to be the main purchasers of agricultural land comprising nearly 90% of buyers in many areas.” Investors are showing up in the market to purchase land, but are also being realistic in the timing of their purchases and the long term outlook for agricultural land.
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