Wallaces Farmer

Land Values: What will the pandemic mean for agriculture in the months and years ahead?

Doug Hensley

June 10, 2020

4 Min Read
rolling cornfield
COVID-19’s IMPACT: As is often the case with disruptive shifts, there will be winners, losers and lots of unknowns that will become clear as time passes.Farm Progress

Looking back on the first six months of 2020, it’s safe to say this year has been unlike any in our lifetime. For agriculture specifically, a new decade that started with cautious optimism because of late 2019 passage of the U.S.-Mexico-Canada Agreement and the Phase 1 China trade deal coming together quickly turned sour with the arrival of COVID-19 in the U.S.

Massive demand destruction occurred this spring for row-crop commodities, and the virus completely rerouted the entire supply chain. It threw the livestock sector into disarray as numerous packing plants and other food processing facilities were temporarily shuttered. Markets have been rocked.

Despite all this, the world has continued to turn. The world we generally knew pre-COVID is beginning to come alive again. In Iowa, we’ve enjoyed a mostly smooth and speedy spring planting season, and crops are beginning to stretch their legs with adequate moisture and recent heat. Livestock processing facilities have reopened and are beginning to ramp up capacity again. While we are not back to normal, things are trending in a positive direction.

Longer-term outlook

As is typical, over the past 90 days I’ve regularly polled farmers, as well as members of our professional field staff of farmland brokers, auctioneers, farm managers and farm appraisers who are scattered and involved in several Midwest states. My discussions often dial in on attitudes and appetites for new farmland projects. This helps me maintain a sense of the “mood” of the farmland market.

Most of the folks I’ve talked to believe the demand lost — for corn, ethanol, soybeans, livestock, etc. — over the past three months is forever gone and will not be recaptured. But as we fully open things back up, demand and use will increase again. All believe it may take some time to reach the consumption levels we were running at in February.

I’ve found farmer attitudes, in particular, to be very correlated with how much old-crop inventory they still have unpriced or in the bin. For those who were mostly sold before spring planting, things look more favorable, while not-so-much for those the other way around.

Potential for profitability

The farmland market as reflected by land values, has kept its legs under it through most of the past three to four months. Yes, the number of sales occurring this spring has been down marketwide. Periods of great uncertainty will do that to a market. But the fact that sales volume was down has seemed to support the sales that are occurring.

Commodity prices remain weak, but interest rates are rock-bottom attractive, government support has been significant, and the crop year has been quick out of the starting blocks. So if commodity prices stay down, this may be another year where the Iowa countryside attempts to “out-bushel” the weak prices again, which will translate into a very localized marketplace this fall. Stay tuned. These recent land sales tell me it’s not bad news everywhere.

Northwest

Plymouth County. Southwest of Remsen, 110 acres sold at public auction for $9,600 per acre. The farm has 107 tillable acres with an 86.2 CSR2, which equals $115 per CSR2 point on the tillable acres. This farm is classified HEL and has 35 to 40 acres of hog manure applied at no cost to the buyer.

North central

Kossuth County. Along the Iowa-Minnesota border near Elmore, Minn., 106 acres sold for $7,475 per acre. The farm has 103 tillable acres with an 82.6 CSR2, which equals $93 per CSR2 point on the tillable acres.

Northeast

Chickasaw County. Northeast of New Hampton, 116 acres sold for $8,500 per acre. The farm has 116 tillable acres with an 80.7 CSR2, which equals $105 per CSR2 point on the tillable acres.

West central

Calhoun County. Southwest of Rockwell City, 192 acres sold for $8,977 per acre. The farm has 179 tillable acres with an 87.6 CSR2, which equals $110 per CSR2 point on the tillable acres. A drainage ditch divides the farm into two parcels.

Central

Hardin County. East of Garden City, 142 acres sold at public auction for $6,950 per acre. The farm has 136 tillable acres with an 83.1 CSR2, which equals $87 per CSR2 point on the tillable acres. A creek divides this farm into two parcels. This farm was sold with a lease in place for 2020 crop year.

East central

Cedar County. West of Mechanicsville, 77 acres sold for $11,500 per acre. The farm has 77 tillable acres with a 91.9 CSR2, which equals $125 per CSR2 point on the tillable acres.

Southwest

Fremont County. East of Hamburg, 225 acres sold for $7,626 per acre. It has 210 tillable acres with a 69.0 CSR2, which equals $118 per CSR2 point on the tillable acres.

South central

Madison County. North of Patterson, 47 acres sold for $6,066 per acre. The farm has 46 tillable acres with a 76.6 CSR2, which equals $81 per CSR2 point on the tillable acres.

Southeast

Jefferson County. North of Fairfield, 84 acres sold for $3,929 per acre. The farm has 64 tillable acres, of which 57 acres are enrolled in CRP contracts. The tillable acres have a 62.6 CSR2, and the sale equals $82 per CSR2 point on the tillable acres.

Hensley is president of Hertz Real Estate Services, which compiled this list but did not handle all sales. Visit hertz.ag.

 

 

 

Read more about:

Covid 19

About the Author(s)

Doug Hensley

Hertz Real Estate Services

Hensley is president of Hertz Real Estate Services. The Hertz Farm Management Co. was started in 1946, and now provides a full spectrum of services that includes professional farm management, real estate sales, auctions, acquisitions and farm appraisals.

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