Wallaces Farmer

Land market rides crop prospects

Land Values: Financial concerns continue to keep a lid on farmland bids.

Doug Hensley

May 14, 2019

4 Min Read
rows of corn
TRADE IMPACT: The outcome of trade negotiations will impact commodity prices and underlying asset values, including farmland.

The 2019 crop year is off to a somewhat uneven start. Cold, wet planting conditions persisted well into May, hampering progress across the Midwest. Farmland prices appeared largely stable entering planting season.

Good farms — those with above-average soil types, adequate drainage, easy farm-ability and well-managed fertility levels — continue to sell best. Farmers are still buying nearly 8 out of every 10 farms brought to the market, although non-farming investors have been quite active and represent a very influential buying segment in most corners of Iowa for quality row crop farms.

The farmland market reflects the collective confidence of all participants. When things are going well, farmland values tend to be stable to higher, while weakness in land values shows up when things are not working quite as smoothly. Locally, values always differ when comparing one neighborhood to another. These neighborhood factors include local growing conditions and local sale volumes.

Many factors broadly influence current land sales and values. First, the success (or struggle) of the current growing season will play an important role in current and upcoming land sales. At this point in 2019, the jury is still out, but planting season has not been as smooth a process as compared to recent years. 

Next, the level and direction of interest rate movements broadly impacts the land market. Our current interest rate environment, particularly for long-term rate products, seems to have stabilized, with interest rate levels not significantly higher than 2018. However, short-term rate products (e.g., operating notes) for 2019 were reset to noticeably higher levels, making for slightly tighter cash flow budgets again in 2019. It will be worth watching where rates move for the rest of 2019.

Third, commodity markets are a major influencer in actual farm profitability, as well as the collective confidence and psyche of the Midwest land market. And the mood in the grains complex has not been very positive lately. Big early-season expectations for 2019 crops, coupled with huge ending stocks and an uncertain global trade situation, are pressuring corn and soybean markets.

We maintain a hopeful and positive attitude regarding global trade negotiations, but it is again, fair to say that many across the business ag sector are becoming fatigued, and the resulting pressures are real. The outcome of these trade negotiations will absolutely impact commodity prices and underlying asset values, including farmland.

As we get deeper into the growing season, keep an eye on all these factors, as they are sure to impact the land market in your corner of the world. And stay tuned for further analysis as new information surfaces on these and other topics.

NORTHWEST

Sioux County. West of Rock Valley, 67 acres recently sold at public auction for $13,150 per acre. The farm consists of 66 tillable acres, with a 65.4 CSR2, which equals $204 per CSR2 point on the tillable acres. The farm is classified as HEL, and had hog or cattle manure applied annually in recent years.

NORTH CENTRAL

Floyd County. Near Charles City, 50 acres sold at public auction for $7,825 per acre. The farm has of 49 tillable acres, with an 87.5 CSR2, which equals $91 per CSR2 point on the tillable acres.

NORTHEAST

Black Hawk County. Located within the city limits of Waterloo, 55 acres sold for $9,004 per acre. The farm has 53 tillable acres, with a 67.5 CSR2. It equals $138 per CSR2 point on the tillable acres. This land is divided into two pieces by U.S. Highway 20, which runs through the farm at an angle. 

WEST CENTRAL

Carroll County. East of Coon Rapids, 38 acres sold for $8,935 per acre. The parcel is 38 tillable acres, with an 81.6 CSR2 and equals $110 per CSR2 point on the tillable acres.

CENTRAL

Boone County. Northeast of Ogden, 57 acres sold at public auction for $8,050 per acre. The farm consists of 56 tillable acres, with an 83.2 CSR2, equaling $99 per CSR2 point on the tillable acres.

EAST CENTRAL

Johnson County. West of West Liberty, 77 acres sold for $8,650 per acre. The 77 tillable acres have a 78.6 CSR2, equal to $110 per CSR2 point.

SOUTHWEST

Fremont County. South of Shenandoah, 155 acres sold at public auction for $4,885 per acre. The farm has of 154 tillable acres, with a 65.9 CSR2, equaling $75 per CSR2 point on the tillable acres.

SOUTH CENTRAL

Marion County. Located on the southeast edge of Knoxville, 95 acres sold at public auction for $8,450 per acre. The farm has 89 tillable acres, with an 80.3 CSR2 rating, equal to $112 per CSR2 point on the tillable acres.

SOUTHEAST

Jefferson County. West of Packwood, 90 acres sold at public auction for $7,300 per acre. The farm has 84 tillable acres, with a 74.5 CSR2, which equals $105 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.

 

 

 

About the Author(s)

Doug Hensley

president, 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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