by Jared Augustine

As winter turns to spring, ushering in a new cycle of growth, the winds of change have been starting to blow a little steadier in the farmland market. Recent conversations with farmers and lenders reveal a less optimistic outlook on the farm economy.

With corn prices in the $4-per-bushel range and a lot of old crop still unsold, it’s hard to blame them. If our primary buyer group (farmers) is feeling less aggressive, it’s likely land values will follow suit to some extent.

One sign of a pending shift in the market is the decreased demand for mid- and lower-quality farms. As a result, we have changed our sales method for some of these farms to protect the seller from an auction flop while still bringing them fair market value. I have noticed a few other brokerages doing the same. Be on the lookout for more listings and one-chance sealed bid sales going forward.

Although we still have been seeing strong prices on quality farms, no sales have been a more common occurrence in the past six weeks throughout the Corn Belt. This may be due to high seller expectations in some cases and a weakened market in others.

A land trends and values survey conducted by the Iowa Realtors Land Institute recently estimated a 3.1% decrease in Iowa farmland values from September to March. I believe southern Minnesota has mirrored that trend.

Farm’s physical characteristics

What makes a high-quality farm? Over the next several months, I will discuss different physical characteristics of farmland and how they affect the value of the land. First, let's dicsuss a farm's size and shape.

Large, highly tillable tracts are desirable. Waterways, ditches and dooryards all take away from value. Level to slightly rolling, square or rectangular fields are all good things. Many high-dollar auctions involve an 80-acre tract with about 78 tillable acres.

Farmers with their eyes on expansion and investors alike prefer efficient farmland. Fields with non-square, triangular angles create point rows and are less efficient.

Obstacles that need to be farmed around cost more in time, labor and fuel. Low ground may be considered a wet farm and, thus, less valuable. Too hilly or too much fall in certain areas can lead to water runoff and erosion issues that need to be addressed on a recurring basis.

Pay attention to the color difference in the soil if tilled, as well as the crop during the growing season, as both tend to have a different shade than the rest of the farm. These hills or low spots tend to yield less and take away value from the farm.

In general, big open farms with no trees or low spots that can accommodate large equipment usually command a premium at auction.

Auction results

Here are a few auction results from the past few weeks:

Freeborn County. West of Hollandale, about 285.33 acres sold in four tracts. Parcel one sold for $12,000 per acre and consisted of 73.37 tillable acres with a crop productivity index of 84.2. Parcel two sold for $13,500 per acre and consisted of 18.61 tillable acres with a CPI of 94.6. Parcel three sold for $9,250 per acre and consisted of 68.68 tillable acres with a CPI of 84.2. Parcel four sold for $8,600 per acre and consisted of 111.82 tillable acres with a CPI of 73.

Lac qui Parle County. West of Madison, about 80.49 acres sold for $10,100 per acre. The farm consisted of 76.12 tillable acres with a CPI of 84.1.

Martin County. South of Truman, about 183.79 acres sold in two tracts for $10,150 per acre and $8,300 per acre, respectively. Parcel one consisted of 38.51 tillable acres with a CPI of 88.1. Parcel two consisted of 134.28 tillable acres with a CPI of 91.2.

Cottonwood County.Northwest of Mountain Lake, about 80 acres sold for $13,900 per acre. The farm consisted of 77.75 tillable acres with a CPI of 92.3.

Sibley County. Northwest of Gaylord, about 75.65 acres sold for $11,900 per acre. The farm consisted of 73.58 tillable acres with a CPI of 91.8.

Sioux County, Iowa. North of Boyden, Iowa, about 76.83 acres sold for $26,500 per acre. The farm consisted of 73.07 tillable acres with a Corn Suitability Rating 2 of 99.

Augustine is a Minnesota-licensed real estate salesperson for Hertz Farm Management Inc. He lives near Minnesota Lake with his wife and four children and works out of Hertz’s Mankato office. Hertz Farm Management compiled the list but did not handle all sales. Call Hertz in Mankato at 507-345-5263 or 800-730-5263, or visit hertz.ag.