Farmland Value Update
September 2017: Iowa Farmland Values Rise 2%
The Iowa Chapter of REALTORS® Land Institute released its September 2017 Land Trends and Values Survey, which showed a statewide average increase of cropland values of 2.0% for the March 2017 to September 2017 period. Combining this increase with the 0.9% increase reported in March 2017 indicates a statewide average increase of 2.9% from September 1, 2016, to September 1, 2017.
“Land prices vary greatly depending on quality and location. With harvest in full swing and even wrapping up in some areas, yields have been “better than anticipated” in central Iowa, considering the lack of rain and tough growing conditions. With higher yields and so many variables that determine land prices, the next 6 months will be interesting to see what happens. Currently, there is low supply and high demand,” said Kyle J. Hansen, real estate broker for Hertz Farm Management and Vice President of the Realtors® Land Institute (RLI).
Major factors contributing to current farmland values include lower commodity prices, limited amount of land on the market and growing conditions in the regions. Other factors include lack of stable alternative investments, cash on hand, and increasing interest rates.
2017 Illinois Farmland Prices Flat to Slightly Weaker
According to a survey by the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFRMRA) REALTORS® Land Institute (RLI), the value of Illinois farmland and sales activity was basically flat during the first half of 2017. The survey shows good-quality land dropped 3.0% while average quality land saw a 3.8% decline and fair-quality land fell back 4.4%.
“The land market in Illinois varies a great deal based on location. Although the market is a bit weaker on average, excellent quality farms are still commanding strong prices, while lower quality farms are showing the most variability and the greatest decline. Knowing where the market really is today can be quite difficult with the low volume of sales we are experiencing in some areas,” said Eric Wilkinson, President of ISPFRMRA and Managing Broker-Farm Manager for Hertz Farm Management.
2017 Trends: Weakness Continues in Nebraska
The Kansas City Federal Reserve reports the value of Nebraska dryland cropland declined 8% for the year ending July 1. In addition, the bank reports irrigated cropland decreased 7% while pasture land decline 8%.
“The market within Nebraska has proven to be light and variable throughout the state. The main contributing factors for the variability are the number of listings down significantly with few property owners willing to sell. The main contributing factors to the lower market are: Overly high property tax valuations and levies, lower commodity prices, and cash on hand,” explains Steven Fish Farm Manager for Hertz Farm Management.
Across the Midwest currently, the overall farmland market is experiencing what is referred to as a ‘push-pull’ environment. In most areas crops are above expectations in terms of yields, but much of this year’s harvest may be sold at prices which are below the farmer’s cost of production. This situation especially impacts farm operators that cash rent a high percentage of their farmland.
For owners concerned about farmland values dropping in the future, now may be a logical time to consider selling, as most farmland sales in any given year occur following fall harvest. Investor interest in land remains strong, as investors seek diversity from traditional financial instruments and the safety in owning a physical asset.
Please call your Hertz Farmland Professional if you would like to discuss farmland values, what is for sale in your area, or if you have interest in discussing a prospective sale of your farm.