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Serving: IA
Cornfield with grain silos in background Rod Swoboda
TRUE VALUE: While crop prices and interest rates are key drivers of land values, COVID-19 and weather uncertainty have shined a light on farmland as a stable valuable asset.

Farmland proves itself again

Land Values: Early-fall sales are setting the tone for a continued stable market.

As fall approaches, it’s common to see a handful of public farmland sales occur just before harvest, typically during September. The thinking is that the crop is largely “made” by Sept. 1. But because harvest is not yet in full swing, farmers and investors will be available to attend preharvest auctions.

Just as important as their schedule availability, prospective buyers by this time will also have a reasonable idea of what’s in the fields to be harvested, so it is believed they’ll have the confidence to bid and make intelligent buying decisions at preharvest sales. The outcome of these early-season sales can often set the tone for the balance of the fall and winter sales season.

Some thought this year might be different because 2020 has been a year unlike any other. Since mid-March, COVID-19 concerns have disrupted nearly every aspect of society. Then, an early-season drought that was initially focused on western Iowa eventually expanded to include most of the state as we entered August. In mid-August, ferocious straight-line winds from a complex storm system that most of us had never heard of — a derecho — decimated tens of millions of acres in a prime crop growing region of Iowa.

Weathering uncertainty

Adding to the uncertainty are all the negative political ads that started months ago, and the potential implications from the election outcome. Put it all together, and no one would believe this would be a formula for a stable-to-stronger farmland market — but it’s exactly what we’re seeing.

If you can somehow cut through all the motion and noise coming from the challenges of 2020, you will find that the fundamental drivers of the farmland market have trended positively at just the right time. Specifically, the commodity markets have rallied significantly since mid-August, based both on huge late-summer export sales as well as USDA report adjustments that the grain complex viewed as bullish. Second, long-term interest rates remain at unprecedented rock-bottom levels, which is a significant driver-motivator for both farmers and farmland investors.

Government aid soaring

The U.S. government continues to inject enormous financial support to the ag industry, which is boosting the countryside. If you think back, agriculture has enjoyed an alphabet soup of direct government programs in the past 12 to 24 months (Market Facilitation Program, Coronavirus Food Assistance Program, etc.). The cash flows from this continued government support is important to farmers who may be buyers and has a direct effect of buoying next year’s land rental market, thereby positively impacting farmland investors who buy and rent farms to local farm operators.

Finally, when measured against historical norms, there are very few farms that are publicly available to buy. This “low inventory” reality, especially when coupled with stronger grain prices and uber-low interest rates, creates a competitive sales environment. The sales noted below are a testament to the competitive Iowa farmland market, and these early-fall sales have set the tone for the land market as we enter the winter sales season.

Land values map

Northwest

Cherokee County. Southwest of Hanover, 73 acres sold recently at public auction for $10,300 per acre. The farm has 69 tillable acres with a 93.2 CSR2, which equals $117 per CSR2 point on the tillable acres.

North central

Hancock County. Near Kanawha, 40 acres sold at public auction for $10,350 per acre. The farm has 39 tillable acres with an 87.7 CSR2, which equals $121 per CSR2 point on the tillable acres.

Northeast

Buchanan County. West of Lamont, 74 acres sold for $9,800 per acre. The farm has 74 tillable acres with an 81.9 CSR2, which equals $120 per CSR2 point on the tillable acres.

West central

Harrison County. Northeast of Missouri Valley, 197 acres sold at public auction for $5,800 per acre. The farm has 174 tillable acres with a 51.9 CSR2, which equals $126 per CSR2 point on the tillable acres.

Central

Dallas County. Northwest of Adel, 303 acres sold at public auction for $12,000 per acre. The farm has 302 tillable acres with an 88.4 CSR2, which equals $136 per CSR2 point on the tillable acres.

East central

Cedar County. North of West Branch, 310 acres sold for $7,500 per acre. The farm has 275 tillable acres with a 77.9 CSR2, which equals $108 per CSR2 point on the tillable acres. The balance of the farm is in waterways and hay ground.

Southwest

Cass County. Near Massena, 40 acres sold at public auction for $7,020 per acre. The farm has 38 tillable acres with a 66.6 CSR2, which equals $111 per CSR2 point on the tillable acres.

South central

Union County. South of Creston, 80 acres sold at public auction for $6,200 per acre. The farm has 68 tillable acres with a 71.4 CSR2, which equals $102 per CSR2 point on the tillable acres.

Southeast

Wapello County. North of Ottumwa, 80 acres sold at online auction for $10,200 per acre. The farm has 80 tillable acres, with an 85.8 CSR2, which equals $119 per CSR2 point on the tillable acres.

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

 

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