Several factors will come into play in 2017 that will determine the direction of land values, according to a national farm real estate company.

Randy Dickhut, senior vice president of real estate operations for Farmers National Co., notes that questions abound as to the direction of commodity prices, interest rates, inflation, challenges in the world economy, weather and U.S. tax law.

“Buyers of ag land are asking if it is an opportune time to make a purchase of a farm or ranch, while sellers are asking if the market dynamics are indicating that it is good time to sell land,” Dickhut says. “Depending on location, quality of land and other factors, our agents report seeing regions and local areas where land prices are stable to somewhat strengthening post-2016 harvest. Then there are other areas where land values have continued to decline.”

A key factor impacting land prices will be interest rates, Dickhut says. Grain and livestock prices affecting farm and ranch income also will influence land values.

“Foreign trade policy and its effect on agriculture will be closely watched over the next few months. Potential changes in tax laws could affect estate taxation and capital gains rules that, in turn, influence buying and selling decisions,” Dickhut says.

Land values in Minnesota and the Dakotas
Sales volumes and the number of units sold in the Northern Plains region have held stable in the past six months, said Brian Mohr, area sales manager for Farmers National Co. in Garretson, S.D.

“With the biggest drops behind us, I look for only a 5% to 10% decline in land values in the Northern Plains this year,” Mohr says.

Medium and poor-quality ground is down again this year by approximately 5%. Top-quality land is experiencing a bigger drop this year — as much as 20% at recently held auctions.

In North Dakota and Minnesota, private listings and sealed bid auctions are working best, while public auctions are most successful in South Dakota. Most private listings sit on the market no more than three months, though, and upward of 90% of all auctions result in a transaction, Mohr says. Half of all auctions sell the day of, with the remainder coming to fruition that same week.

“All of the good land sells,” he says.

The most active sellers in this region are retiring farmers and family trusts. In turn, the majority of buyers are farmers looking to expand their operations.

Iowa land values
The second half of 2016 saw a jump in land auctions in the state of Iowa, with nearly $35 million greater volume in the second half of the year and 3,763 more acres sold. Auctions are the most successful approach to selling land in Iowa, with 97% of auctions resulting in a sale the day of the event, says Sam Kain, ALC, GRI, ABRM, national sales manager for Farmers National Co. based in West Des Moines, Iowa.

Top-quality land remains stable, with a possible 5% decrease. Medium-quality land is experiencing a 5% decrease, and low-quality land is seeing a 10% decrease in value. Pasture ground remains stable. Kain says he is seeing some land sales resulting from farmers experiencing financial pressures. Approximately 85% of buyers are local farmers, and 15% are investors.

“The land market has been stronger since harvest was completed, which I attribute to above-average yields,” Kain says. “For 2017, a lot will depend upon how much land comes on the market. Current commodity prices indicate land values should be trending downward, but if we continue to see so few farms come on the market, prices will stay steady.”

Source: Farmers National Co.

Land sales in Minnesota
Here’s a recap of recent sale information, provided by Wingert Realty and Land Services Inc., in Mankato:
Brown County, December 2016: northeast of Comfrey, 124.87 tillable acres, CPI 93.5, $6,407 per tillable acre; August 2016, north of Comfrey, hunting and recreation parcel, 40 total acres, $50,000.
Blue Earth County, December 2016: northeast of St. Clair, 221.9 tillable acres, CPI 84.8, $8,100 per tillable acre; November 2016, northwest of Vernon Center, 71.46 tillable acres, $8,493 per acre; northwest of Vernon Center, 38.78 tillable acres, $9,863 per acre; southwest of Lake Crystal (purchased for restoration), 153.69 total acres, $6,442 per acre; north of Minnesota Lake, 149.64 tillable acres, CPI 93, $7,825 per tillable acre.
Faribault County, December 2016: west of Delavan, 117.32 tillable acres, CPI 92.1, $7,901 per tillable acre.
Rice County, November 2016: southeast of Montgomery, 91.10 tillable acres, $7,278 per acre.