November 2018 Wallace’s Farmer “MarketPlace Extra”
Fall harvest operations continue across the State of Iowa. Even though crops were ready, persistent rainfall patterns across many areas of the state delayed early harvest activity. Early yield reports that have come in have been quite strong in eastern Iowa, while early yield totals in other areas have tended to be more variable, especially in the central, north-central, and northwest crop reporting districts. A more complete accounting of yield results will soon be reported. Despite variable growing season conditions in Iowa, expectations were high for prospective yields totals.
Localized differences in growing season success are likely to play a slightly larger role in farmland sale results this fall. Early season sales are already reflecting this uneven trend. In areas where another big crop was produced, we expect to see more strength and stability in the land market, even in the face of lower grain prices. In areas where crop yields are disappointing, however, there appears to be a more noticeable potential for market softness. Regardless of the area, high quality farms with the most productive soils, solid drainage, easy farm-ability and strong fertility continue to sell best. Farmers continue to be the most prevalent group of buyers, even though non-farming investors continue to be active buyers across Iowa.
To better understand the land market, pay attention to a handful of key issues. First, as described above, production success/disappointment from area to area sets the mood in the countryside every year, and shows up in sale enthusiasm, or lack thereof. Second, keep an eye on increasing interest rates, as they will continue to pressure farmland values. The Federal Reserve again raised short-term rates at their September meeting, and another 25-basis-point bump is expected before year-end. While short-term rates don’t directly impact long-term borrowing costs, short-term rates quite directly impact farm operating notes, which are coming into focus as we approach operating loan renewal season. Third, the disruption created in the commodity markets by the enactment of global trade tariffs is real, and has softened markets, particularly for soybeans, and continues to be a daily topic of discussion in the grain markets. The emergency aid package offered through USDA is likely to help blunt the cash-on-cash impact of the disruption for 2018, but as previously described in this column, land assets are long-term assets and few buyers enter the market with a short-term perspective. So, how global trade negotiations play out in the weeks and months ahead will continue to impact commodity prices, market confidence and, ultimately, underlying asset values, including farmland. Of note as we approach the 2019 growing season, will be the reset levels for 2019 crop insurance price levels – in the face of lower commodity prices in 2018, we still enjoyed relatively high crop insurance price levels that were established in February 2018. If things don’t change in the grain markets, these revenue policy price levels will reset to significantly lower levels for 2019 production and will add more pressure to an already stressed market. Finally, don’t forget about negotiations currently occurring on the new Farm Bill – this policy is likely to impact the countryside for the next several years. Stay tuned for further analysis as new information surfaces on all these topics.
127 +/- acres, located west of Paullina, recently sold at public auction for $14,300 per acre. The farm consisted of 123 +/- tillable acres with a CSR2 of 94.8, and equaled $155/CSR2 point on the tillable acres.
102 +/- acres, located northeast of Woden, recently sold at public auction for $9,400 per acre. The farm consisted of 101 +/- tillable acres with a CSR2 of 86.9, and equaled $109/CSR2 point on the tillable acres.
Black Hawk County:
67 +/- acres, located east of Gilbertville, recently sold for $9,000 per acre. The farm consisted of 67 +/- tillable acres with a CSR2 of 87.1, and equaled $103/CSR2 point on the tillable acres.
38 +/- acres, located southeast of Denison, recently sold at public auction for $5,400 per acre. The farm consisted of 34 +/- tillable acres with a CSR2 of 80.6. The sale equaled $75/CSR2 point on the tillable acres.
156 +/- acres, located north of Story City, recently sold at public auction for $11,100 per acre. The farm consisted of 155 +/- tillable acres with a CSR2 of 85.7, of which 7.8 acres were enrolled in CRP through 2026. The sale equaled $130/CSR2 point on the tillable acres.
200 +/- acres, located north of Keswick, recently sold at public auction for $5,300 per acre. The farm consisted of 151 +/- tillable acres with a CSR2 of 58.6, while the remaining 49 acres consisted of waterways and timber. The sale equaled $120/CSR2 point on the tillable acres.
74 +/- acres, located south of Stanton, recently sold at public auction for $4,400 per acre. The farm consisted of 72 +/- tillable acres with a CSR2 of 59.1. The sale equaled $76/CSR2 point on the tillable acres. Importantly, the purchaser of this farm was to receive the 2018 soybean crop.
129 +/- acres, located southeast of Creston, recently sold for $4,200 per acre. This gently to moderately sloping farm consisted of 110 +/- tillable acres with a CSR2 of 61.3. The sale equaled $80/CSR2 point of the tillable acres.
Des Moines County:
73 +/- acres, located east of Mt. Union, recently sold at public auction for $11,000 per acre. The farm consisted of 71 +/- tillable acres with a CSR2 of 74.6. The sale equaled $152/CSR2 point on the tillable acres.
Hertz Real Estate Services compiled this list, but not all sales were handled by Hertz. Call Hertz at 515-382-1500/800-593-5263 or visit www.Hertz.ag.