Demand for agricultural land pushes prices to near 2014 levels

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 prompts them to bid more aggressively for additional land than has been the case in the past. of the past six years.

“Selling prices for farmland have increased 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. “Tenders between interested buyers are really driving up land prices right now. “

Related: The agricultural land market shows strength and resilience compared to 2020

Individual investors, both first-time buyers and experienced buyers, are entering the land market in search of a safe, long-term real estate investment in an environment of low interest rates. Buying investors 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 prices of agricultural land occurs in most parts of the grain belt and with most types of land.

“At the Farmers National Company auction, we’re seeing competitive bidding pushing the prices of good cropland 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 there was still enough demand in the market for agricultural land 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 attract more sellers to the market as estates, trusts, recent heirs, and family groups decide to sell the farm or ranch and take advantage of the higher prices. Plus, the uncertainty surrounding future tax policies will trigger a selloff 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 make 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 responding to an increased number of calls from landowners 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 rising land market, it becomes more difficult to predict what price 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 by auctioning it off or in some form of competitive bidding that brings together potential buyers and allows them to drive up prices,” he said. declared.

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 are 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 issues have tempered 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, sales manager for the 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 a number of 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.

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About Natalee Broderick

Natalee Broderick

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