MT. JULIET, Tenn. (DTN) -- Investors are common characters at farmland auctions, but they're usually buyers, not sellers. That's just one of the interesting aspects of a large auction in Wisconsin last week.
Fall Line Capital, an ag tech and farmland venture capital firm, sold 7,428 acres of farmland spread across six counties between Minneapolis and Wausau, Wisconsin. It took two days to auction off the 103 tracts, which the company has been accumulating during the past decade.
"It's quite impressive to put a package of this size together in that part of the state and have 85% of it be tillable," said Luke Schrader, one of the managers overseeing the sale for Schrader Real Estate and Auction Company. The land is in Barron, Dunn, Polk, Chippewa, Marathon and Clark counties.
The portfolio sold for $46.2 million in all, an average of $6,121 per acre. Schrader said the average per-acre sale price includes the recreational ground and hides some of the more interesting aspects of the auction, like the 249 acres that sold for $10,682 each, a record high for agricultural land sales in Barron County. Another 1,769 acres sold for $7,233 per acre.
According to the University of Wisconsin-Madison's annual land price report, only 9% of the land sold in the state in 2022 carried a price tag of $10,000 or above. Half sold for between $2,600 and $6,000. The report is based on records of land sales. You can read it here: https://farms.extension.wisc.edu/….
Fall Line Capital Co-founder Clay Mitchell, who's a fifth-generation Iowa farmer, said northwestern Wisconsin has many of the same silt loam soils he's used to farming. The limitation is the length of the growing season and risk of early frost.
"What I saw was the frost-free days increasing, and seed technology and machinery technology was allowing planting early," he said in a video promoting the sale. "We've seen, since we first bought land in Wisconsin, the yield has increased more than four times faster than the rest of the country."
Mitchell said land prices at auction have hit blistering peaks in recent years, with some surpassing $20,000 per acre in Iowa and Illinois.
"This is an area that's still an affordable way to get into farmland with productivity that's approaching the I-states," he said.
Schrader said one of the things Fall Line did as it bought land was make improvements. The company installed drainage tile on nearly 1,200 acres with the heaviest soils, a practice that isn't nearly as common as in other parts of the Corn Belt. It also added irrigation pivots to 285 acres, installed grass buffer strips and expanded the use of no-till conservation practices with its tenants. It even worked with growers to start raising canola, an out-of-the-box choice for a region that's historically produced lots of small grains and forage for the state's famous dairies.
At last week's auction, there were 19 buyers, with 153 bidders on the first day and 83 on the second. Two institutional-type investors walked away with about half of the property, while the 17 other highest bidders were a mix of farmers and local businessmen that intend to work with local operators. There were eight out-of-state bidders, and some of the winners did use 1031-exchange money.
A 1031 exchange is a tax break that allows you to avoid paying capital gains taxes when you sell a property and reinvest the proceeds in another property of similar or greater value.
Schrader said the broadest takeaway from last week's auction is that the farm real estate market is still strong, despite some of the headwinds from interest rates. For more, please read "Interest Rates Drawing Some Investors Away from Ag Land" here: https://www.dtnpf.com/….
To put it in perspective, his company sold 5,000 acres in one day last week.
"That's a lot of acreage for a local market to absorb and a lot of capital for a local market to spend," Schrader said. "But we still saw quite a bit of dollars on the board from local folks. I think it's a good testament that demand for farmland is strong, whether you're talking about local operators or institutional type investors."
Katie Dehlinger can be reached at firstname.lastname@example.org
Follow her X, formerly known as Twitter, at @KatieD_DTN
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