COLUMBIA CITY, Ind. -- Farmland prices in the Midwest are continuing to hold up remarkably well, though the market appears to be growing more selective in terms of location and quality, according to an assessment of recent land auctions by Schrader Auction Company, which markets farmland throughout the Midwest.

"Overall, the land market has been quite resilient, despite lower commodity prices and a recessionary economy. On the average, I would say that cropland in Indiana, Ohio and Illinois is down 5 percent or less to date," said R.D. Schrader, vice president of the company.

"Out of 15 auctions conducted between February 24 and March 16, eight reflected a steady market, with prices similar to those that we were seeing in the fall of 2008. Four showed declines of about 5 percent. That's 12 out of 15 that were holding steady or declining moderately, which is little short of amazing," said Schrader.

Schrader said his company is continuing to see large numbers of bidders, and the shrinking supply of land on the market has probably helped prices hold up overall.
"In every community where we've sold farmland, we've seen buyers who are seeking to add to their existing land holdings, and when farmland is available for lease, farmers are competing vigorously for it," said Schrader.

In addition to the underlying strength of the farmland market, the two most notable trends are the variation from one market to the next and the disparity in prices for land of varying quality. As a whole, prices on higher quality farmland are holding up better than those on lower quality land, he said.

"The dynamics are very different depending on where you are and what's happening in the local economy. The price of land of similar quality can vary by 10 percent and even 20 percent from one county to the next. We had one sale of 90 acres of quality soils in a floodplain with only a driveway access, and it sold for $6,600 per acre. In other communities, it may have sold for as little as $4,500 or $5,500 per acre. Our highest price on land in March was $7,063 per acre in Moultrie County, Ill.," he said.

Two tracts of recreational land -- in Indiana and Illinois -- sold at prices that were down approximately 10 percent from the fall. In Michigan, a March 16 auction of 670 acres in scattered farms north of Detroit attracted a strong field of bidders, but the $2,414 per acre was down approximately 15 percent from the fall.

"You have a lot of farmers in Michigan who had relied on income from their jobs in the automobile industry, and now the area has double-digit unemployment -- 11.6 percent as of January. With those conditions, it's more important than ever to have a strong marketing campaign to reach the buyers who are there," said Schrader.

As in the fall, farmland continues to outperform most alternatives as an investment.

"The Wall Street Journal headline for March 6 pointed out that the stock market was down 25 percent, and on Feb. 24, the Journal called the market being down 50 percent from its high. By contrast, it's amazing that most of the farmland we've sold recently has remained steady. Even in the areas hit hardest by the economy, land has been a more stable investment than stocks or residential property," he said. "There may be short-term declines due to higher input costs and uncertain grain prices, but as of now, there's no evidence of a reversal in the long-term upward trend of farmland prices."

Schrader Auction Company, based in Columbia City, Ind., is one of the nation's largest auctioneers of agricultural land.

SOURCE: Schrader Real Estate & Auction Company via Market Wire.