Farmland remains in a delicate supply-versus-demand balance
High prices cure high prices, but will that be the case with the record-breaking farmland prices seen in 2021 and early 2022?
“Market conditions were aggressive in 2021,” says Jim Rothermich, a farmland real estate appraiser with Iowa Appraisal. “The market was starving for acres the first half of the year, but finally reacted in June due to higher prices and fear of potential increases in estate taxes. Auctioned acres were far above average for the remainder of the year.”
In Iowa, the typical number of acres auctioned in January range from 5,000 to 6,000 acres, he says. This year auctioned acres hit 7,976 acres, up 44% from January 2021.
FARMLAND EXPECTATIONS
How soon could this extra supply exceed demand? Not quite yet, according to results from the 2021 LandOwner and Pro Farmer land survey, which featured farmer and landowner responses from 30 states.
“Our survey shows plenty of willing buyers expect to be in the market in 2022,” says Davis Michaelsen, LandOwner editor. “Those who plan to be in the market shot above those who do not by nearly 20 percentage points.”
Willing buyers combined with other market fundamentals indicate an intense market this year.
“All demand factors — favorable interest rates, well capitalized lending institutions, investors looking for safe haven investments and farmers holding cash — continue, and it does seem like a ‘strike while the iron is hot’ scenario,” he says.
CASH RENT LEVELS
Not a single survey respondent believes cash rent prices will fall in 2022, while 38% expect rents to increase by 10% or more. For 2021 rents, the vast majority of respondents expected cash rent levels to remain unchanged.
“Land, both owned and rented is in tight hands,” Michaelsen says.
