Land values held steady by strong farm incomes, tight demand

By Spencer Chase

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, June 11, 2014 - Despite dropping commodity prices, land values across the nation are holding steady after reaching record highs last year, according to national farm and ranch real estate company Farmers National Company (FNC). 

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Economic indicators at the end of 2013 pointed toward a drop in farm income that would, in turn, trigger a drop in all-time high land values observed last year. But FNC said strong farm income and a tight land supply kept land values stable. 

“The anticipated large drop in farmland values hasn't happened, as farm incomes were stronger than expected going into 2014,” Randy Dickhut, vice president of real state operations for FNC, said. “Original income projections of 20 percent below last year were not realized.”

Stability in the land value market nationwide does not change the large disparity seen between regions. According to FNC, values for what it deems high quality land range from $3,500 to as high as $12,500 in some Corn Belt states such as Indiana, Illinois, Iowa and Nebraska. Dickhut said the upper plains region has seen the biggest drop in land values and the Delta region's land values saw increases of 13 percent this year, largely due to good crop production. 

FNC is also pointing to what it calls “selective demand” as another reason that land prices are leveling off. Sam Kain, national sales manager for FNC, said land buyers still want land, but are willing to wait for a piece that better fits their needs. 

“Buyers are definitely choosy right now, but will pay for quality land,” Kain said. “We just aren't seeing the frenzy and competition for properties we did last year. Whether or not we see a 10 percent of greater drop in values is yet to be seen because supply of available properties for sale is low. We still consider this a good land market based on historic trends.”

For livestock producers, resurgence from recent droughts has led to rebuilding of cattle herds in Nebraska and Texas, which put pasture land at a premium. Lowered commodity prices also cheapened feed costs for livestock producers, further increasing the ability for these producers to purchase additional land. 

In South Dakota and northwestern Nebraska, effects of the 2013 blizzard continue to influence the land market, especially for premium grassland. Much like conditions in Nebraska and Texas, producers seeking land to graze their newly rebuilt herds are seen as the major driving force in these land prices. Auction activity and strong demand for grassland triggered sales of individual tracts for $3,750 and $4,050 per acre, records for grazing and pasture grass. According to FNC, many acres of grassland are also being bought and broken up for cropland. 

Dickhut said he doesn't see any reason for a further decline in land values and points to recent stability as a reason for his optimism. 

“The 2014 outlook for farms remains positive,” Dickhut said. “Farm owners continue to search for high quality land to expand their operations. I think economic forecasts overrated the demise of the U.S. land market. Things didn't fall apart, but instead held steady and strong. Profitability for operations helped to ultimately keep property values strong.”


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