September 2020 Wallace’s Farmer “MarketPlace Extra”
As I reflect on the year, I am finding it hard to believe that Labor Day and the fall harvest season are just around the corner. We have all been distracted this year and been through some uncomfortable situations, haven’t we?!? Given all the personal and business-related disruption from COVID-19 I was, personally, lulled into thinking the summer growing season was going to be the ‘normal’ part of 2020. Then, on August 10, the massive “Derecho” line of storms ravaged a huge crop production area in Iowa and neighboring states. With a snap of Mother Nature’s fingers, the anticipated normal part of the year for a big part of Iowa was turned on its head. In early August, it appeared we were positioned to harvest a record crop, even despite some areas that were a little too dry this summer. But now, the vast extent of the storm damage from August 10th is likely to move the overall production needle lower, particularly for corn acres.
Wherever the neighborhood, farmers and landowners will look to capture every bushel possible. As in many recent years, the formula for success this year appears tied to an approach where producers attempt to “out-bushel” the commodity market weakness. This may be a struggle to accomplish for cornfields that were snapped flat on the ground. In those circumstances, we are likely to learn how valuable crop insurance can be. A reminder of how important every decision we make in the springtime can prove to be several months – or years - later. Our decisions certainly influence the outcomes we experience year-to-year, but also over the long term. Like I tell my kids, if you can stack one good decision on top of another, over the long term, you will succeed more often than not. Good decision making does not guarantee anything, but it does better position you to succeed.
Long-term thinking (and long-term profitability/success) is also a key to the current standing of the farmland market. Said another way, most farmers and landowners have learned to play the “long game” really well. What occurs in any one year does not cast the die for the market forever, good or bad. This has never been clearer to me than in 2020. While so many parts of our society seem to be on fire, the farmland market has very much kept its head. And, put simply, there are still more people who want to buy land than who want to sell land. As I discussed last month, there are several reasons for this resilience including little overall leverage, ultra-low interest rates, low inventory of farms for sale, and strong long-term performance relative to other investment alternatives.
Yes, what happens in your local neighborhood this fall with harvest results will either goose the bidding at sales, or maybe cause people to sit heavy on their hands. The impacts of COVID, the recent monster storm, and other factors will impact our farmland market this fall. But overall, it seems that farmland as an asset class has never reflected stability like it has thus far in 2020. And that stability only seems to add to the collective desire by the market to own more. How do I come to that conclusion? The sales below, and those of the past 6 months, just continue to impress me.
Palo Alto County:
57 +/- acres, located east of Ruthven, recently sold at public auction for $7,950 per acre. The farm consisted of 53 +/- tillable acres with a CSR2 of 87.8, and equaled $97/CSR2 point on the tillable acres.
92 +/- acres, located near Nashua, recently sold for $7,250 per acre. The farm consisted of 84 +/- tillable acres with a CSR2 of 88.8, and equaled $89/CSR2 point on the tillable acres.
Black Hawk County:
73 +/- acres, located southeast of Dunkerton, recently sold at public auction for $10,200 per acre. The farm consisted of 70 +/- tillable acres with a CSR2 of 87.8, and equaled $121/CSR2 point on the tillable acres.
113 +/- acres, located southeast of Harlan, recently sold at public auction for $9,150 per acre. The farm consisted of 101 +/- tillable acres with a CSR2 of 83.4, and equaled $123/CSR2 point on the tillable acres.
141 +/- acres, located west of Blairsburg, recently sold via one-chance sealed bid sale for $8,515 per acre. The farm consisted of 134 +/- tillable acres with a CSR2 of 83.5, and equaled $107/CSR2 point on the tillable acres.
154 +/- acres, located west of Walker, recently sold at public auction for $7,400 per acre. The farm consisted of 137 +/- tillable acres with a CSR2 of 79.2, and equaled $105/CSR2 point on the tillable acres.
40 +/- acres, located southwest of Casey, recently sold for $8,097 per acre. The farm consisted of 36 +/- tillable acres with a CSR2 of 77.2, and equaled $117/CSR2 point on the tillable acres.
113 +/- acres, located southeast of Winterset, recently sold via online auction for $5,410 per acre. The farm consisted of 74 +/- cropped acres with a CSR2 of 67.5, while the balance of the farm (39 +/- acres) was pasture and grass waterways.
80 +/- acres, located north of Washington, recently sold for $7,375 per acre. The farm consisted of 65 +/- tillable acres, with a CSR2 of 67.8, and equaled $134/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.