Minding Ag's Business

Online ag real estate websites like AccuAcre.com, AcreValue.com and WhatsMyFarmWorth.com are making headway with farmland valuations, but they are not yet perfect replacements for human appraisers. I tried to make that point in a recent article on these "Zillow-like" websites for agriculture ("Ag's Real Estate Robots Gain Ground," https://www.dtnpf.com/…). At the moment, what the sites do best is accumulate other types of real estate information, such as soil types, historic yields, comparable sales, field boundaries and who owns the land. As one economist pointed out, they might reduce your chance of buying a lemon.

But Dennis Reyman, an accredited appraiser in Storm Lake, Iowa, cautions not to be too quick to dismiss the expertise of human appraisers.

"These websites are not terribly different than the databases that appraisers already use, except that a good appraiser has verified sale data which has been analyzed and adjusted for various factors," Reyman says. "These robotic programs can give folks enough info to be dangerous. It’s not uncommon to see these programs produce values which are off of actual results by as much as 20-30%. Try telling someone their farm is worth $7,000 when the computer says $9,000. Since its human nature to want to believe the best financial news, that can be a challenging conversation. "

Reyman cites one example: His firm sold a rough Iowa farm (41 Corn Suitability Rating with hills) in mid-November for $7,500 per acre. The farm had been appraised by a separate firm for $5,500 per acre. "My quick $ per CSR point calculation agreed with that, except that I knew there had been no public auctions of land in that neighborhood since 2012. Therefore, the neighborhood speculation of $6,000 was fine with me," he says. "The auction went quickly over $7,000 and ended at $7,500 as two farmers competed for the land. We were very pleased, as were the sellers. However, the AcreValue.com figures were 7% higher than even that."

Another problem which is hard for computers to differentiate are nuances which can affect land values significantly, Reyman adds. "Since land rarely trades hands, it takes a long view of sales history and neighborhood influences to understand these things. The human appraiser not only uses his eyes but also his ears to know how recent economics might be affecting demand in the neighborhood. Are we in a neighborhood where 100-year family dynasties make the market? Are we in a neighborhood where recent livestock losses will remove some potential bidders, or are most of the livestock feeders more than able to keep moving along with it? I don’t think the computers are that good yet. It can be challenging enough for the astute human! "

Howard Halderman, president of Halderman Farm Management and Real Estate in Wabash, Indiana, believes the services are an improvement over the status quo, but doubts he will be out of work anytime soon. "These services are a natural evolution and the next step for the ag market, but they will never replace what I do," Halderman says.

Halderman believes every farm has intangible values that aren't objective enough to put into a logical matrix. For example, Carroll County, Indiana is a tightly held, competitive neighborhood adjacent to Lafayette, Indiana with timber soils, he notes. But its property sells at a premium to its soil type because it is a corn-deficit area benefitting from local ethanol plants and a strong swine industry. "It didn't go through the 1980s debacle so land has been held by the same families for many generations," he says. When farmland comes up for auction, it's a seller's market. Can a computer account for that?

This discussion reminds me of a question someone asked Captain Chelsea "Sully" Sullenberger at a Rabobank conference I attended last month. Sullenberger, as you recall, was the pilot of the US Airlines Flight 1549 that crash landed in Manhattan's Hudson River after losing its engines when it hit a flock of Canadian geese. Somehow, though he had never practiced a water landing, Sully and his co-pilot saved all of the 155 souls on board with no personal injuries.

Won't jetliners someday be piloted by computer, just like Google is experimenting with driverless cars? Not likely, Sullenberger responded. "Technology can only do what it is programmed to do. Humans can handle the unpredictable."

So I go back to my premise. There's a wealth of information at your fingertips with these new ag real estate websites. But given the unpredictability of land markets, they shouldn't affect human appraisers' job security any time soon.

Follow Marcia Taylor on Twitter@MarciaZTaylor

© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.