WASHINGTON, Jan. 15, 2014 – Farmland sales continue to climb,
according to data released by national real estate and management firm Farmers National Company. The
company says it made $750 million worth of sales in 2013, compared to $640
million in 2012.
But with a softening commodities market – cash corn prices
in the current marketing year will be down 36 percent from the previous, USDA
forecast in a report
last week – can climbing land prices continue to break records?
Farms continue to be profitable “despite lower commodity
prices…due to reductions in fertilizer expenses of nearly 30 percent,” said Randy
Dickhut, vice president of real estate operations at Farmers National. “This is
prompting farm owners to continue buying premium land to expand their
operations.”
In Iowa, the firm found, the average price of high quality
farmland in 2013 was
$12,000 per acre – the same as the previous year.
Though economists at Purdue University predict fertilizer
prices will remain low, some experts say that won’t be enough keep land values
afloat should commodities continue their downward spiral.
Low interest rates have also slowed down price increases,
though the outlook for those financial instruments may soon change. In a biannual
Kansas State Agricultural Lender Survey in November, lending institutions indicated
interest rates will increase in both the short and long term.
The lenders also said they expected land values to continue
to increase for the next year – but ultimately fall between 2015 and 2017.
Producers also seem wary of rising land prices. In the
annual Iowa
Land Survey conducted by Iowa State University Extension in November,
economist Michael Duffy found producers reporting record land values. But he
also found the majority of them believe commodity prices are negatively
affecting farm prices.
Land values, Duffy said, remained high for 2013 on the whole
because the beginning of the year was so bullish. That compensated for dropping
commodity prices in the second half of the year.
“I think that, as you look, land values basically were up
the most in the beginning of the year and then they followed crop prices
throughout the year. As crop prices around June, July started their downward
trend, that’s pretty much when the land values did,” Duffy said.
The survey also found that Iowa producers believe
uncertainty and government programs are hurting land prices. In other words,
land values are pressured by “generally the fact that we don’t have a farm
bill, and don’t know the direction things are going to be going,” Duffy said.
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