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Did COVID-19 create new farmland competitors?

stevegeer/iStock/Getty Images Illinois farms and farmland aerial view
Some farmland sales are being divided into smaller parcels to accommodate an emerging buyer.

The coronavirus pandemic has caused a great deal of changes — large and small — in nearly every facet of our lives this past year. Farmland sales haven’t been immune to the process.

Some of the changes have been more apparent than others. Auctions are much more likely to have an online or call-in bidding component, for example.

And even before a farmland auction occurs, real estate agents are getting more adept at creating a “Zillow-like” online presence for those parcels by including dozens of photos or even video of the property for sale, so remote bidders have a better handle on its production potential.

One thing the pandemic hasn’t affected is the overall volume of farmland sales, says Jason Burbage, president of National Land Realty.

“Investors rediscovered a safe haven in land real estate in 2020, which made for a very good year for land sales, with record-breaking volume in the second half of the year,” he says.

Investors and farmers have long competed for ground, but a new competitor is emerging — also thanks in part to the pandemic. Increasingly, city dwellers are looking to rural America for more wide-open spaces to hunt, fish and enjoy time away from the crowds.

“We still see investor-driven buyers, but this is a new market, with a lot of demand for people to get into rural spaces,” Burbage says.

That trend has caused some agents to split up land sales into smaller pieces, sometimes as small as 50 acres, to accommodate this emerging buyer. Equipment sales data further proves this trend is heating up, with sales for sub-40-hp tractors jumping 96.5% higher year over year in March — a category more appealing to recreational users, rather than large farming operations.

Burbage expects overall farmland sales to remain healthy this year.

“We feel good about 2021 unless something completely unexpected happens,” he says.

Of course, after 2020, anything is possible.

With plenty of interested buyers, anyone who is thinking about selling farmland would be better off pulling the trigger sooner rather than later, Burbage adds.

A recent National Land Realty survey of real estate agents and brokers showed that in 2020:

  • 44.5% saw land values increase between 1% and 5%
  • 20% saw land values move 6% to 10% higher
  • 9% saw land values increase more than 10%

“If selling your property is something you plan to do, we’re in a really good market right now,” he says. “It’s an extremely unique situation that we haven’t seen in years.”

Caring for land pays off

Conservation practices are a cornerstone of many farming operations across the country. But oftentimes, knowing the exact financial impacts of various practices can be difficult to calculate.

This challenge prompted a collaborative study between the National Corn Growers Association’s Soil Health Partnership, the Environmental Defense Fund and K-Coe Isom. The groups reported three key findings that were common among farmers who participated in the study:

  1. Conservation tillage reduces operating costs. Savings were largely captured from lower fuel and oil spending, plus reduced equipment needs and lower repair expenses.
  2. Cover crops can be profitable, but experience matters. The study found that, in general, as farmers’ comfort level with cover crops improved, so did their margins. For example, farmers who have more than five years of experience reported lower per-acre cost and higher net returns than their less-experienced counterparts.
  3. Success with conservation is optimized with a targeted and tailored approach. Conservation practices tend to be more profitable when they are used to address specific management challenges.

More information about the study can be found at soilhealthpartnership.org.

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