The sky is falling, the sky is falling. We all heard the story of Chicken Little. A recent report by Iowa State reported that farmland values are falling, down 8.9% from one year ago. Just what many were waiting to hear to be able to say I told you so. I don’t want to add fuel to the fire, but the values reported in the Land Sales Bulletin statewide average value for the short term perspective (basically values by quarter as reported on page 9 of section one) are down 7.9% for all sales combined from the beginning of 2014 and ranges...
As we all know the next sales season has begun, but unfortunately for the Land Sales Bulletin we don’t see the actual results until after the sale close’s which most haven’t yet. If you have a moment email me any “unofficial” results at email@example.com, it would be greatly appreciated. For example 160 acres in Lafayette County, WI sold at auction in mid October for $12,500 per acre to an investor. The buyer owns considerable holdings in the area and was adding on. This is as good of corn farm as you will find, no matter what state you are from (No that is not a misprint, it is 200+ bushel corn ground and it is located in Wisconsin). This was substantially higher than the seller expected and I was told a farm family was the contending bidder.
As the summer winds down another farmland selling season kicks off. From what I have read most of the experts are predicting a decline in farmland values, but unlike the mid-80’s, of a more gradual nature. Rabbobank’s report included later in section one indicates that the driving forces behind the run up in values in recent years has been low interest rates, high commodity prices and limited availability of land for sale.
I have heard a few rumors that some recent (last five years or less) farmland investors are selling some of the land acquired in the last few years. I am not saying it is wrong, as I find that interesting and shouldn’t be surprised that on the first possible blip downward some are jumping ship and looking elsewhere. I suppose they have captured a pretty good return considering the appreciation seen over the last several years, so why not take your profits while you can. What I don’t know is the motivation for the sale. What I do know is I remember just a few short years ago land hit $3,000/ac and some investors sold as they had bought in the low $2,000/acre. I also remember a farm family selling when land hit $4,000/acre as land can’t get any higher. This is easy for me to say as I was not an active participant in the farmland market of the 1970’s followed by the 1980’s, but I just don’t see what has changed in the long term fundamentals of the farmland market. Hind sight is 20/20 and like everything else time will tell if it was a wise move or not.
I find Jeff Caldwell’s article on page two of section one pretty interesting on the amount of money lined up on Wall Street to invest in farmland. I believe it and think that $10 billion is a drop in the bucket for Wall Street. I have been told Wall Street money managers run in the same circles and invest in “herds.” If that is true I would think the ones who didn’t invest the first go around are waiting to invest when they see a second chance opportunity, and the ones who did invest then will add to their holdings. I am not saying this is good or bad for Wall Street money to own farmland, just saying I believe Wall Street could easily invest that much more money in farmland. What’s not in the article that I believe will also happen at the same time is those conservative farmers/farm families that have expanded tremendously via renting farmland will jump off the sidelines at about the same time, at least in many areas of the Midwest, for the right parcels. I guess time will tell.
Recent quotes from people much smarter than I concerning today’s farmland market.
“The farm sector is currently in excellent shape from a leverage and credit perspective;” “The issue that I worry about most, at this point, is a couple of bumper crops around the world.” Quotes by Dr. Allen Featherstone, professor of ag economics, Kansas State University in an interview by Steve Cocheo on 11.30.13 for the ABA Banking Journal.