Interest in buying farmland has grown since a downturn induced by a coronavirus pandemic blanketed the land market last spring. Farmers feel more financially secure as high commodity prices have arrived on top of large government payments in 2020. This is causing farmers to bid more aggressively for additional land than in the past six years.
“Selling prices for farmland have risen 5 to 15% in the past six months, with most of the increase occurring since the first of the year,” said Randy Dickhut, senior vice president of real estate operations at Farmers National Company. “Competitive tendering among interested buyers is really putting pressure on land prices right now.”
Related: The agricultural land market shows strength and resilience compared to 2020
Individual investors, both first-time and experienced buyers, are entering the land market in search of a safe, long-term real estate investment in a low interest rate environment. Investing buyers rarely outbid farmer-buyers for a good farm unless they have 1,031 tax-deferred swap funds to spend in a short period of time.
The increase in the price of agricultural land occurs in most areas of the grain belt and with most types of land.
“At the Farmers National Company auction, we see competitive bidding pushing the prices of good farmland to levels close to 2014 values,” Dickhut said. “Mid-to-lower quality farms also experience higher selling prices, while pasture increases are more modest.”
Related: Has COVID-19 Created New Competitors For Farmland?
The demand for good agricultural land exceeds the supply of farms for sale. In recent years, the number of farms for sale has been lower, but the market demand for agricultural land has remained sufficient to balance the lower supply, resulting in stable land prices. One of the main factors driving prices up is the strong demand to own farmland right now.
Higher land values will bring more sellers into the market, as estates, trusts, recent heirs, and family groups decide to sell the farm or ranch and capture the higher prices. In addition, the uncertainty surrounding future tax policies will trigger a sale sooner rather than later for some.
Related: Farmland values boosted by lack of land to sell, higher crop prices
Landowners who are considering selling their farm are now considering both the higher proceeds they would get from the sale and the potential tax obligations that might be owed.
The land market will balance the increased demand for good cropland against what could be an increasing supply of farms for sale.
“Our agents are receiving an increasing number of calls from property owners who wish to sell for the above reasons. Our sales activity pipeline for the summer and fall is filling up, ”said Dickhut.
Related: Optimism fuels the farmland market
Farmers National Company’s land sales activity has already been very strong and above the market for the past seven months, with dollar volume of land sold up 60% from last year and 67% compared to the average for the last three years. The number of acres sold during this period is up 64% from last year.
In a booming land market, it becomes more difficult to predict what a farm will actually sell for on any given day, especially when there is demand from both farmers and investors, Dickhut said.
“The best way to sell cropland in today’s market is to sell it at auction or in some form of competitive bidding that brings potential buyers together and allows them to push the price,” he said. .
Here is an overview of sales by region.
Iowa, Illinois and Missouri
“Prices for cropland in Iowa statewide have increased 13% since January, while prices in Illinois have increased 10%,” said David Whitaker, regional sales manager for Farmers National Company.
Missouri’s increases are smaller but still significant.
“We are seeing sales of $ 13,000, $ 14,000 and $ 15,000 an acre for good cropland in our recent auctions. Mid-grade farms are also selling well now, which is a change from the past few years, ”said Whitaker.
The land market has more buyers than sellers and the stock of farms for sale is at its lowest.
“The prospect of a seven dollar corn is stimulating demand for good cropland in the Corn Belt. It makes farmers even more optimistic about buying farmland, ”Whitaker said.
Related: What are external forces doing to the value of farmland?
Indiana, Michigan, Ohio and Kentucky
“We’re seeing a 9-11% increase in land prices for good cropland in the area,” said Linda Brier, area sales manager for Farmers National Company.
“At the Farmers National Company auction, we had sales well over $ 13,000 an acre for good cropland. Price points vary from state to state, but good cropland is strong everywhere, ”Brier said. “Prices have definitely gone up since the fall and even more since the first of the year.”
North Dakota, South Dakota and Minnesota
“We’re seeing a 10-15% increase in land prices for good cropland in the area,” said Brian Mohr, area sales manager for Farmers National Company.
Prices for ranches and pastures are relatively stable and do not experience the same increases as good cropland in the region. Investing buyers are more interested in ranches in the West River area. Drought concerns have dampened buyers’ interest in the most sensitive areas.
Related: The values of agricultural land strengthen by 2021
Nebraska, Kansas, Oklahoma, Texas and Arkansas
“We are seeing a 10% to 12% increase in land prices for good cropland in the area,” said Paul Schadegg, area sales manager for Farmers National Company.
Prices for arid farms in the western plains are also strengthening, after a long period of weak demand.
“There is now more demand for medium to lower quality land than there has been for several years,” he said.
Source: National Company of Farmers, who is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all of its subsidiaries are not responsible for the content of this information asset.