All Posts February 14, 2020

Aberdeen News
Farmers National Company
February 14, 2020

OMAHA, Neb. – The land market in 2019 continued the plateau trend of the past several years during which the supply of agricultural land for sale on the market remained lower than average and prices for good quality cropland held mostly steady. Looking ahead to next year, will financial stress from lower commodity prices and poor harvests in some regions cause prices to decline?

Farmland sale activity in the first part of 2019 was slower than it had been for some time with late spring and early summer especially void of farms for sale. Planting delays and prevented plantings contributed to the lackluster activity.

“Despite the slower land market, Farmers National Company and its agents saw a 25 percent increase in acres sold in 2019 from the prior year and the most since 2014. Sellers are seeking the best advice and marketing strategy to sell their land and that is why the amount of land listed for sale at Farmers National is very strong at over $300 million” said Randy Dickhut, senior vice president of real estate operations.

Land values in 2019 once again bucked the prevailing depressed mood in agriculture to hold steady or even increase slightly in some instances except for the most stressed areas or segments such as dairy. With generally more cautious buyers, some markets saw a move to private treaty listings or bid sales instead of the traditional public land auction.

“The lower supply of land for sale had much to do with land prices being mostly steady as did having adequate demand for quality cropland. Lower quality farmland had less demand and in many cases was harder to sell. Investor interest in cropland increased somewhat in 2019 with several new entities entering the market and also from an increase in purchasing activity by existing institutional investors,” said Dickhut.

Several other factors had a favorable effect on farmland values in 2019. Interest rates remained historically low and moved even lower during the year when at one time, most thought rates would work higher. The other significant factor supporting land values and buyer demand, especially by farmers, was the amount of government support for production agriculture. One third of agriculture’s 2019 net farm income came from government provided sources including crop insurance, the Market Facilitation Program, and various other conservation and program funding.

In 2019, the ag industry endured floods, planting frustrations, trade uncertainty and struggling commodity prices. Financial conditions for some producers degenerated, but agriculture overall remains in better shape than expected due to support payments and the fact that land values remain historically strong. The land market weathered many storms in 2019 just like U.S. agriculture as both balanced precipitously on the plateau of the past five years.

So will 2020 be the year that the land market breaks out of its plateau?

“There are a number of factors that indicate that the land market will continue to be steady in 2020,” said Dickhut. “Interest rates are low and are poised to remain so during the foreseeable future and government support through MFP payments will likely continue if Chinese trade issues are not fully resolved. Overall, agriculture is in adequate financial shape, but there are individual and regional concerns.”

There are also factors that could have a more depressing influence on farmland values in 2020, Farmers National reported. In addition to on-going trade disruptions, there is the concern if there will be an increase in financially caused sales of land by producers. Buyer demand for good cropland has been adequate for the supply and this would have to remain so in order for land values to continue on their plateau.

Iowa and Wisconsin

What started out as a slow year in farmland sales has now picked up the pace as additional farms come on the market.

“The first six months of the year were about as slow as I have seen the land market. Auction activity really picked up for Farmers National agents through the fall months and for the upcoming winter sales season,” according to Sam Kain, area sales manager for Farmer National Company. The ongoing lower supply of land for sale on the market has helped support land prices.

“Good quality cropland remains steady to strong. Farmers National recently sold a tract of land for $13,000 per acre, which was definitely above expectations. Lower quality land takes more time and effort to get it sold, which is more typical of Wisconsin farms due to the financial stress of the past few years in dairy. Good quality cropland sells well in the state while lower quality land or properties with dairy facilities struggle to sell,” Kain said.

Looking ahead into the coming year, attention turns to what is going to impact the farm economy and the land market. Producers are beginning to wonder if the current lower commodity prices will be the new normal for a while. Financial stress has increased for some individual farm operations and areas that may have had below average yields.

“As the number of farms and amount of acres sold increases, there has to be adequate demand to support current land prices. We have been seeing more cautious buyers for several years and now we are starting to see fewer buyers interested in making a land purchase” said Kain.

With the current land market sitting on a plateau for the past several years, landowners are asking questions about what to do if they are thinking of selling their farm.

“We are getting sellers calling Farmers National looking for good advice about the land market and for the best marketing and sales strategy to get their land sold. These landowners want someone they can trust to sell their farm,” said Kain.

Nebraska, Kansas, Oklahoma and Texas

“Land sale activity across the Southern Plains has been quite varied and dependent on location, quality and use,” said Paul Schadegg, area sales manager for Farmers National Company. “In general, good quality continues to sell while lower quality land struggles.”

During the fall, Farmers National auctioned a good quality crop farm in north-central Kansas for $8,800 per acre, which was near record for the area even though land prices are off the peaks by five years.

“Our local agent did a great job talking with all the potential buyers and Farmers National did a full marketing campaign for the sale. We definitely reached the buyers,” Schadegg said.

Texas timber land and ranches are in demand from buyers and are holding or increasing in price. In Oklahoma, Schadegg said that Farmers National has held a number of “good auctions selling both cropland and grass.”

“Nebraska land buyers are being more cautious, forcing sellers to be more realistic in a price that will consummate a sale,” said Schadegg.

Looking ahead into the coming year, attention turns to what is going to impact the farm economy and the land market and whether or not the current lower commodity prices will be the new normal.

Financial stress has increased for some individual farm operators, but overall financial conditions in agriculture are adequate.

With the current land market sitting on a plateau for the past several years, landowners are asking questions about what to do if they are thinking of selling their farm.

“We are getting sellers calling Farmers National looking for good advice about the land market and for the best marketing and sales strategy to get their land sold. These landowners want someone they can trust to sell their farm,” Schadegg said.

North Dakota, South Dakota and Minnesota

The Northern Plains region experienced some of the worst planting conditions anywhere this past season with many unplanted or late planted acres in parts of South Dakota. The northern reaches had an extremely tough harvest season with snow, rain and a hard freeze that didn’t allow the harvest of beets and potatoes to be completed.

“There will be areas and producers who will be under increased financial stress after the 2019 season,” said Brian Mohr, area sales manager for Farmers National Company. “The poor harvest in parts of North Dakota will impact farms and suppliers. South Dakota seemed to weather the storm better and Minnesota production was more normal.”

What started out as a slow year in farmland sales has now picked up the pace as additional farms come on the market. Weather and the effect of lower soybean prices as a result of the Chinese tariffs brought caution into the land market both for sellers and buyers.

The ongoing lower supply of land for sale on the market has helped support land prices, Mohr noted.

“Good quality cropland is in demand and remains steady. Lower quality land which has seen a price decline takes more time and effort to sell,” Mohr said. “We are now seeing a good increase in sale activity at Farmers National as we move into the winter months. Our agents are working with landowners who are deciding to sell their land. Most sellers are inheritors or estates, but we expect we might see some additional land sales later in the year due to financial stress.”

Looking ahead into the coming year, attention turns to what is going to impact the farm economy and the land market.

Despite the historic late planting season, most producers will tread water another year due to the various support payments. With the current land market sitting on a plateau for the past several years, landowners are asking questions about what to do if they are thinking of selling their farm.

“We are getting sellers calling Farmers National looking for good advice about the land market and for the best marketing and sales strategy to get their land sold. These landowners want someone they can trust to sell their farm,” Mohr said.