For 2020, the team at Farmers National is looking for a continuation of a mostly flat land market with some regional variances. Causing the plateau in steady land values has been several years of lower supply of land for sale, which so far has negated any depressed values as a result of the profitability pressures.
As Randy Dickhut, senior vice president of real estate operations at Farmers National Company, explains three factors are driving land values:
• Trade issues, resumption of China purchasing ag goods
• MFP payments and if a third round will be approved (One third of 2019 net farm income came from government provided sources including crop insurance, MFP, and other conservation and program funding. • Interest rates
Farmers National Company reports the number of 2019 sales was lower than the peak of 2013. However, the company and its agents saw a 25% increase in acres sold in 2019 compared to 2018. (scroll down for state-by-state sale price averages and outlook for 2020.)
The number of tracts for sale in early 2019 started off slow but picked up speed through the year. Dickhut says we could see the same trend in 2020 but it won’t likely be from a large uptick in forced sales.
“Financially encouraged sales are happening, but a good portion of them are quietly off the market as farmers are reaching out directly to investors and then renting the land back,” Dickhut explains.
Dickhut was recently on Agritalk to discuss the trends and drivers:
He says there is likely at least one more year until the financial stresses of today are reflected in the land market.
“Some activity will be pushed out later in the year, or the financial issues may take another season. Some lenders feel confident, some are more pessimistic,” he says.
One trend Dickhut notes that has spread geographically is a move from public auction to more private treaty sales and more sellers being open to bid sales.
In the coming year, Dickhut sees farmers continuing to be the majority of farmland buyers.
“Especially for the good crop land, farmers have saved for those opportunities and they will be ready to buy,” he says.
Dickhut shares two key things to watch in 2020 will be geopolitical events (particularly as it relates to energy prices) and weather.
Looking out even further, he says, “It’s important to be aware of the boarder world of what’s going on outside of ag as well as listen to the boots on the ground with landowners, farmers and our own agents.”
In that vein, he says looking 10 years ahead, there’s a convergence of four important trends:
2. Global consumer trends
3. Generational transfer going on with farm operators
4. Who owns the land and who will finance the operation
“How these four things will mix together will be interesting,” he says.