As 2014 came to a close, land values had stabilized from the double digit
increases of the past few years, according to Farmers National Company, the
nation’s leading farm and ranch real estate company. Location and quality of
land continue to be main drivers of prices for a given tract of
land. The lower supply of land for sale and the continued demand for
agricultural land is maintaining general stability of the land
market.
“While lower grade land has seen drops in value near
15 percent from recent highs, top quality crop and grazing land still bring
solid prices as owner operators and investors seek to expand their operations
with the most productive land, said
Randy Dickhut, AFM, Vice President of Real Estate Operations of Farmers
National Company.
According to Farmers National Company, the supply of land for sale is less than
in the past few years as there is no tax policy change driving sales and
landowners remain tight holders of the asset. Land
is viewed as a long-term asset and owners consider agricultural land a stable
investment in a changing world, said
Dickhut.
Demand for cropland and grazing land from owner operators remains good, but
buyers are being more realistic in what they will pay given lower grain prices.
Sellers are having to be realistic in evaluating the quality of their land and
the expected selling price in order to have a successful sale.
Despite leveling or moderately decreasing land values overall, Farmers National
Company has seen strong prices paid for specific properties within the last 60
days based on local competition and the desire for quality. According to
Dickhut, farmland seldom comes up for sale in many locations, therefore local
producers are willing to pay top dollar to grow their operation and asset
base.
Recent value adjustments in the land market still leave land values at
historically high levels in the longer-term view. Price softening is happening,
but at different rates depending on the region, prices for major commodities in
that region, and quality of the land. Profitability from record crop incomes
supported by insurance coverage, has kept farm operations in the black and
producers interested in adding land.
“Buyers are being more realistic when considering land
purchases which has reduced the fervor of rapidly escalating prices seen at
land auctions in recent years, said
Dickhut.
Owner operators continue to be the main
purchasers of agricultural land comprising nearly 90% of buyers in many areas.”
Investors are showing up in the market to purchase land, but are also being
realistic in the timing of their purchases and the long-term outlook for
agricultural land.
Profitability in recent years has left many farm owners cash rich and opting
for land purchases for personal and business investments. The tangibility of
land and the ability to grow their operation makes land a preferred investment
for the owner operator. Producers are being more realistic with their land
purchases as they give more attention to the economics of the asset and seek
increased financing.
Even with lower grain prices, record grain harvests will keep net farm income
quite positive in 2015. This factor should keep the current market fairly
stable for the time being.
“As we forecast further out into late 2015 and 2016,
circumstances could shift, said
Dickhut. One of the factors that could impact values moving into 2015 is the
potential for rising interest rates. If rates increase gradually, as predicted,
market impact should be minimal in the short term.
Longer term, world demand for water, food, fuel and fiber will determine commodity
prices, which will affect future land values. As long as the supply
of land for sale remains low and demand continues to be present, land values
will be supported, according to Dickhut.
Farmland investment is still a positive long-term opportunity for most
producers and investors. Despite slight downward shifts, the land market
remains stable and supports business expansion for farm operators looking to
grow their businesses and investors wanting a long-term asset.
Regional information
can be found at: http://www.alberscommunications.com/media-center/farmers-national/january-2015-land-values/
Farmers National Company, an employee-owned company, is the nation’s leading
agricultural landowner services company. Farmers National Company currently
manages more than 4,850 farms in 24 states comprising more than 2.1 million
acres. The company has sold more than 3,700 farms and more than $2.65 billion
of real estate during the last five years. Additional services provided by the
company include auctions, appraisals, insurance, consultation, oil and gas
management, lake management, a national hunting lease program, forest resource
management, and FNC Ag Stock. For more information on land listings in your
region, visit the Farmers National Company website at www.FarmersNational.com.
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