Farmland Values Firm Up

INDIANOLA, Iowa (DTN) -- From Ohio to Nebraska, farm real estate brokers note a firmness in the market that wasn't there three months ago.

"Even six weeks ago, we were looking at selling $3.30-per-bushel old-crop corn. There's a much different feel right now in the market," said Doug Hensley, president of real estate services for Hertz Farm Management with offices in Iowa, Illinois and Nebraska.

While the disastrously wet spring across the Corn Belt could create localized pockets of financial distress, brokers say quality land is still commanding strong prices and attracting an array of buyers.

Hensley said that at a recent auction, a Story County, Iowa, farm sold for $10,600 per acre. In Washington County, an 80-acre piece with an 89 corn suitability rating sold for $11,000 an acre, while a tract in the same county with 70 suitability rating sold for $6,950 per acre, "which I thought was a tremendous sale," noted Hensley.

Other farmland brokers echo the optimism.

"I've switched my tune from talking about a softer land market to one that has some strength to it," said Steve Bruere, president of Peoples Company based in Clive, Iowa, with real estate agents licensed in 20 states. "Land buyers are lining up in anticipation of a stronger commodity market. Interest rates are incredibly low, and if corn is going to be $5 or $6 a bushel this fall, you can make some money in farming -- if you have a crop."

Ron Spencer, a farm real estate broker in Lima, Ohio, said it's been the wettest spring anyone remembers, but that hasn't translated to the land market. He said he sold an 80-acre parcel in Wood County, Ohio, last week in an area that had virtually nothing planted.

"People were fighting over it," he said. A farming family bought it for $9,200 an acre.

Mark Wilson, owner of Wilson National real estate and auction group in Hillsboro, Ohio, said farms with premium soil and tiling can bring $8,000 to $10,000 per acre or more, depending on the circumstances. He said a farm in west-central Ohio recently sold for $12,400 an acre.

The Ohio farmland market has been bolstered the past two to three years by developers buying up farmland around large and small cities. Subsequently, the land sellers have used that money to buy other farmland in Sec. 1031 tax-deferred land exchanges.

"We don't have as many farmers pursuing land as we did five years ago, but 1031-exchange money has helped keep farmland values steady," Wilson said. "If development slows down, that might make a difference to farmland values in Ohio."

Farmland brokers that spoke with DTN said extreme variability will be common this growing season.

"Some farmers who got their crop in, even if it only yields 160-180 bpa corn at $5, can make money, and 50 bpa soybeans can make money," said Howard Halderman, president of Halderman Real Estate and Farm Management that covers Indiana, Michigan, Ohio and Illinois. "We may see some financially stressed sales in a few areas. But we'll have to wait and see what happens with the government Market Facilitation Payments, crop insurance and commodity prices."

Randy Dickhut, senior vice president of real estate operations at Farmers National Company, said the land market is on edge because of all the uncertainties of this growing season.

"I think there will be winners and losers this year, probably accentuated even more so because of the delayed planting and the weather," he said.

Hensley calls it a hyper-local market. Some areas look good, and if the weather cooperates, farmers who get a decent crop will make a profit. Other areas will just break even, but in total wash-out areas, there will be weakness in the land market.

Dickhut said it will be important to watch the buyers.

"There's capital out there, but how much is there in the neighborhood?" Dickhut said. "We're watching to see if a few more farms come up for sale due to financial reasons. How many does it take to put a little too much for sale on the market in an area?"

Wilson said stronger commodity prices will help farmers with corn in the bin from last year. One Ohio ethanol plant was paying $5.10-$5.25 per bushel for corn this week.

Those prices are helping to renew optimism in the farmland market, said Mark Mommsen with brokerage firm Martin, Goodrich and Waddell in Sycamore, Illinois.

"Land buyers see opportunity ahead," he said. "This weather has gotten us closer to a reset than any time since 2013."

Hertz's Hensley said there will still be struggles, especially among farmers that rely heavily on rented ground, don't have a lot of equity in their land or struggle with production.

"For the most part, farm lenders have not forced farmers to do anything on a large scale. There's been some 'encouraged' sales of equipment and some parcels of land, but there haven't been many farmers forced out of business by their lender. It's not like the 1980s," Hensley said.

Dickhut said that in the 1980s, high interest rates and inflation drove farmers to keep operating until the bank shut them down completely. Their land had already lost so much value, it limited their options.

Now, farmers own more of their land outright, pay significantly lower interest rates on mortgages and are more willing to sell off an asset if it means staying in business.

Even though there will be local problems in the land market this fall, Hensley thinks higher crop prices offer potential for a stronger land market. "In the meantime, the land market may be idling until we get a clearer picture on trade with China, planted acres and crop yields."

Elizabeth Williams can be reached at elizabeth.williams@dtn.com

(KD/AG)

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