The coronavirus (COVID-19) pandemic is covering the globe and creating market volatility. How will that trickle down to the farmland markets? Will the uncertainty cause sellers to forgo sales? Or will sellers opt to offer land to the market, to improve their financial standing?
“Bottom line, it is too soon to tell,” says Randy Dickhut, senior vice president of real estate operations for Farmers National Company.
If you look at previous patterns, land values normally react counter cyclical to the stock market.
“For quite a while, stocks were on a huge up move,” he says. “Right now, there are too many uncertainties to play out before we have a clearer picture of the economic and financial impacts on agriculture and land values.”
The big questions will be:
- How long will COVID-19 require social distancing?
- Could this pandemic create a new normal and defy the long-term trends of farmland prices?
- How big of a long-term impact will COVID-19 have on the agricultural commodities?
“This is all unprecedented,” says Doug Hensley, president of real estate services for Hertz Farm Management.
Listen to Hensley’s recent conversation with AgriTalk’s Davis Michaelsen:
The silver lining, Hensley says, is the pandemic is hitting during a traditionally slow time for farmland sales.
“Once you start approaching planting, people don't want to go to auctions and leases are in place on farms,” he says. “Typically, in mid- to late-March is when the farmland market really slows up and takes us a little breather.”
The auctions that were scheduled to take place were either postponed or moved to an online bidding platform.
What is Hensley watching going forward? Buyer confidence.
“For the strongest sales to occur, you have to have all segments of the land market participating,” he says. “Farmers buy a lot of farms, but they are competing at most sales with local investors and non-local investors.”
The uncertainty around the long-term effects of COVID-19 could cause some buyers to step aside, Hensley says.
“Some, who would have been buyers 10 days ago, are now taking a breather until they have a better idea of how the land market is going to respond to this situation,” he says. “We don’t know what the impact is going to be ultimately.”
Follow comprehensive COVID-19 and agriculture coverage at AgWeb.com/coronavirus.