Selective buyers vie for high quality farmland
“Even with recent drops in crop size for farmers, profits are still at a level higher than in 2010,” said Volchoff. “Farm debt is still low in relative historical terms.”
According to Volchoff, several issues in the U.S., such as healthcare and interest rates are likely to impact economic trends and thus land inventory levels and sales activity once they are resolved. The direction of market and political issues will likely shape the rest of 2013. As the housing market improves, developers will likely begin to buy land for development. This could trigger more 1031 tax deferred exchanges pushing new money into the market.
Regional Land Value Reports
Kansas, Oklahoma and Texas Panhandle
The land market throughout the High Plains continues a strong drive into 2013 despite persistent dry weather and springtime freezes that have damaged growing wheat across a wide area. According to Monty Meusch, Farmers National Company area sales manager, land values throughout Kansas, Oklahoma and Texas do not show any down turn despite weather challenges across the region.
One major change in this region’s market is the impact of an inventory shortage that is a direct result of a strong sell-off of land late in 2012.
“Forecasted tax law shifts and increasing prices to record levels spurred on this high level of sales activity which has led to a slowdown so far this year,” said Meusch. “Despite the slowdown, values are still holding strong.”
Meusch projects a continued low number of listings coming available on the market into the next quarter. A projected large corn crop could impact values later in the year, as well.
Sales prices in Kansas of top quality land range from $3,800 to $6,000 per acre depending on location. Prices for irrigated high quality cropland in the Texas Panhandle are between $3,000 and $4,000 per acre.
Iowa and Minnesota
Demand for high quality farmland continues to be very strong in the North Central Region including Iowa, Missouri, Minnesota and South Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. While demand from both investors and farmer operators is high, farmers are the ones paying top prices and targeting premium pieces of land.
Auction numbers in this region continue to be strong, prompting sellers to net top sales prices, according to Kain.
“Continued low supplies of land in this area have kept the market strong,” said Kain. “Low interest rates have also helped drive the market. Without low rates, current commodity prices do not justify current land values. Any jump in rates could lead to a sales slowdown, but its strength as an investment is keeping activity healthy.”