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Grain basis impacts land values

Land Sales: Despite downturn in farm country, farmers are itching to buy land.

September 10, 2024

3 Min Read

By Jared Augustine

The late summer/early fall sale season is starting to kick off, and it will be interesting to see how the farmland market handles the busy season of farm sales. Folks thinking about selling their farms are starting to take action for an end-of-the-year sale as their 2024 farm leases are set to expire.

Farmer moods are not currently at an all-time high. The price of corn is about $4, interest rates still are high compared with the past 15 years, and many parts of southern Minnesota and northern Iowa had a tough crop year due to excessive rainfall.

Despite all that, there still are farmers itching to buy another farm, the investor class has been largely saving and waiting for the right time to buy, and the amount of land still owned debt-free creates an extraordinary amount of purchasing power. I wouldn’t be surprised if we see a continued stable land market through the end of 2024.

One factor that affects farmland values regionally is the grain basis. The difference between the cash price and the futures price of a commodity is called the basis. The basis can either be negative or positive, depending on supply and demand.

Every local market (think co-op, ethanol plant, soybean crush plant) has a different basis that is adjusted for freight, handling, storage, seasonal supply and demand, and purchasing power of the buyer. These local differences affect how much money farmers can make depending on their farm location related to the market. Many farmers are willing to haul their grain much longer distances and wait for hours in line because the basis is stronger than at the local elevator.

In regions of the Corn Belt where the basis is stronger, producers tend to have deeper pockets and, therefore, a greater ability to pay more for land when competing against their peers on the open market. These small differences add up over the years and create higher average land values regionally.

Here are a few recent sales:

Sibley County. North of Arlington, about 54.97 acres sold for $10,500 per acre. The farm consists of 50.40 tillable acres with a Crop Productivity Index of 92.

Otter Tail County. South of Foxhome, about 79.5 acres sold for $6,000 per acre. The farm consists of 78.96 tillable acres with a CPI of 93.9. About 151.01 acres sold for $4,200 per acre. The farm consists of 147.64 tillable acres with a CPI of 65.8.

Blue Earth County. West of Smiths Mill, about 80 acres sold for $4,625 per acre. The farm consists of 42.43 tillable acres with a CPI of 79.5.

Mower County. North of Dexter, about 320 acres sold for $13,500 per acre. The farm consists of 307.92 tillable acres with a CPI of 93.6. The farm also contains four wind turbines.

Martin County. West of Winnebago, about 70 acres sold for $12,000 per acre. The farm consists of 68.6 tillable acres with a CPI of 94.2.

Augustine is a Minnesota-licensed real estate salesperson for Hertz Farm Management Inc. He lives near Minnesota Lake with his wife and four children and works out of Hertz’s Mankato office. Hertz Farm Management compiled the list but did not handle all sales. Call Hertz in Mankato at 507-345-5263 or 800-730-5263, or visit www.hertz.ag.

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