The annual land price report from Farmers National Company, an agricultural land sales and management firm, gives no clue on the direction of farm and ranch land prices.

"Are land values still trending down or have they bottomed and higher prices are on the horizon?" the company's authors ask in their annual story. "It is as if there are two land markets: one that says it is a good time to sell and one that indicates that it is time to invest in land."

Amid ongoing poor grain prices and with BEEF's latest survey of producer sentiment at least headed for the basement doorway, but countered by strong consumer sentiment about the economy, it is no wonder the land management company can't figure out the direction.

Up-pricing possibilities

Farmers National Company says the strength in the value of good quality farm and ranch land is supported by several factors.

1. There is currently less land on the market than normal.

2. There is adequate buying interest from neighboring farms. The overall agricultural sector remains in a relatively good financial position with a low debt-to-asset ratio.

3. Land is a long-term investment, and expectations for increasing population and food and fiber demand, plus improving personal incomes around the world drive this mindset.

Down-pricing concerns

The opposing viewpoint is voiced this way by the land price report's authors: "The other side of the land market indicates that it is appropriate to sell during this time period. For one, agricultural land values remain historically strong even though they have dropped from the highs of several years ago."

Those who have owned agricultural land for a decade or more, and those who recently inherited land may see the opportunity in today’s values, which far exceed those of the past, the authors note. This leaves those who would sell with the dilemma whether to sell now and capture the good value or hold for a later and possibly higher sale price.

The report's authors add these three concerns to the possible downside for agricultural land prices:

1. Currently there is not a lot of good quality agricultural land for sale. If more come into the market, how much can the market absorb without turning prices lower? The expectation in the land market is that there will be some additional sales of land going into the winter in order to shore up financial conditions of some farmers. Therefore, at what point will an additional amount of land for sale in an area move prices down?

2. With the continuation of lower farm incomes, farmers and ranchers may have less cash to make capital purchases such as land. As farmers and ranchers typically buy 80-95% of the land for sale in rural areas, any slowdown of their purchasing will lessen the bidding and potentially the prices.

3. Rising interest rates, although slow, will have an effect on those land buyers financing their purchase and for those comparing alternative investments. In addition, rising yields on government bonds may demand increased return from agricultural land, as the two have some correlation and competition.