Many crop growers in Minnesota could see their profits squeezed in 2016.
Farmland prices in Minnesota continue to slip after more than a decade of increases. And prices for corn and soybeans are staying relatively low.
Several recent reports find a pattern of falling farmland values in much of the central United States, the Star Tribune reported.
According to an analysis by the University of Minnesota Department of Applied Economics, the average median price of farm real estate in Minnesota dropped 5.5 percent during the first nine months of 2015, from $4,878 to $4,611 per acre. The median — the price at which half of the transactions are higher and half are lower — is considered a good way to gauge price trends at the state or regional level.
A few years ago, double-digit increases in land prices reflected an agricultural boom in Minnesota. But many expected land prices to level off and begin to fall after corn and soybean prices peaked in 2012.
Since then, corn and soybean prices have dropped by about 40 percent. In Minnesota, cash payments for corn generally have stuck between $3.25 and $3.60 per bushel in recent months. That's below the cost of production for many farmers.
"The drop in commodity prices would be the main thing — and farm income prospects," said William Lazarus, a professor and Extension economist at the University of Minnesota.
2016 May be Time to Buy as Land Values Continue to Move
Darrell Hylen is a farmer and agent for Wingert Realty & Land Services in Mankato, which sells 60 to 75 farms a year, mostly at auction. Sales prices were down 5 percent during 2015 for Wingert, and additional declines are likely ahead until grain prices improve, Hylen said.
"The quality land from the peak in 2012 has dropped off 20-plus percent," Hylen said. "The marginal land that's not as productive has seen about a 33 percent reduction since then."
But Hylen said sellers who missed the best time to sell at the highest prices are still getting far more per acre than they would have imagined a decade ago.
"We still have farmers out there with good balance sheets, but they're being more selective and more cautious as they make purchases and move forward," Hylen said.