Farmers National Co. says its real estate sales volume of ranches and farms is up 21% during the first half of the current fiscal year, and up 38% compared to two years earlier. That rise prompted the firm to take a closer look at what is happening.

Farmers National’s fiscal year begins Oct. 1, so the 21% increase is for October 2016 through March 2017, compared to a year earlier. The 38% increase is compared to October 2014 through March 2015.

Operating in 28 states, the company has seen an increase in both number of individual sales transactions and in acres sold. Acres sold increased 10% from the previous year and 27% compared to two years ago. For the first half of its current fiscal year, there were 470 transactions involving 63,925 acres.

Strong demand for land continues
Randy Dickhut, senior vice president, says sales activity is being driven primarily by non-operating landowners. “So far, few farm operators are selling land; there just isn’t much land being offered for sale. And investors continue to be in the market looking for opportunities to add acres to their holdings. The slow decline in land values is part of the reason some landowners are selling.”

These landowners have decided now is the time to sell and capture some of the land appreciation they’ve had in recent years. Dickhut says there is still good demand for land in most of the company’s 28-state service area.

“The number of buyers and sellers for good land in most areas is in equilibrium, and that’s helping our land sales. As long as the seller is realistic about today’s market price for land in the area, there are buyers looking to buy. I credit our sales increases in the face of a slowing land market to our network of agents educating their clients on the current land market prospects,” Dickhut says.

Who is selling farmland today?
It’s not farm operators who are selling land. “There’s a little of that; a few farmers are selling land to maybe shore up their balance sheet or for some other reason. Mostly, it’s non-operating landowners, perhaps with inherited land, who are selling it,” says Jim Farrell, president of Farmers National.

“Some of the people selling now are looking at this market as it is trending lower; land values have been on a downtrend for several years now,” notes Farrell. “They think this might be a good time to sell. Land values are still well above where they were 10 years ago, and we still have strong demand for land, especially high-quality, productive land that is well-drained. Our agents at some sales are surprised at what land is bringing in price. It’s bringing more than what the market might indicate it should, based on today’s low commodity prices and declining farm income.”

Who are the buyers of farmland?
Especially in Iowa, it’s primarily farmers who are buying land. “There are farmers who are financially well off and are looking to add some land,” says Farrell. “There are also investors buying land in Iowa. Most of the investors are people who already own a farm at a location and are adding property to what they own. They rent out the land. Overall, 80% to 85% of the sales we handle today go to local farm operators.”

What about price trends? Which direction are land values going? “Land prices generally are still headed downhill,” says Farrell. “They’re not decreasing as fast as they were, and in some cases and in some areas, they are holding steady. Where we’re seeing the biggest decline in land values is with the poorer-quality ground.”

High-quality ground, in the upper Corn Suitability Ratings, is selling well. Farrell says, “If you go back and look at the top of the land market, say December 2012 and January 2013, and compare it to where land values are today, land prices are down no less than 15% on good cropland and in some cases 20% from those highs. However, that’s still well above where land was in 2006 and 2007. So the land price is still good, and some people are trying to take advantage of that and sell some land.”