Farmers have been willing to pay substantially higher prices for irrigated cropland in the Mississippi Delta in recent years, but that may be changing because of the decline in commodity prices of the last 18 to 24 months.

Between 2012 and 2014, pivot-irrigated cropland in the Delta counties increased nearly 25 percent in value, while furrow-irrigated cropland appreciated almost 21 percent, according to the “Mississippi Agricultural Land Values Sales Report: 2015,” compiled by Bryon Parman, agricultural economist at Mississippi State University.

Dry cropland in the Delta region appreciated more modestly, at approximately 10 percent, says Dr. Parman, who has been conducting surveys of landowners, real estate professionals and lenders who buy and sell or finance agricultural property sales in the state.

The most recent information from a survey of ag lenders shows lower commodity prices are having an impact on cropland values.

“Survey data from 2015 shows a substantial drop in irrigated cropland values from 2014 and a modest gain in dry cropland values,” he said. “Lenders described irrigated cropland in 2015 as averaging $3,700 an acre while 2014 actual sales averaged $4,365 per acre.”

Values may change

That is an approximately 18 percent drop in the average from the price land was selling the year before. “Dry cropland statewide was mostly flat, appreciating at a meager 1.5 percent,” said Dr. Parman.

“However, caution must be taken when comparing the actual sales price from 2012 to 2014 and the observed survey prices from 2015, as the final sales price from 2015 may differ somewhat once that data becomes available.”

Crop commodity prices in 2014 were much lower than in previous years. “However, the momentum of land values trending upward continued to carry cropland sales prices higher during the year,” says Parman. “As a result, returns to land and profitability based on a 2014 sales price were low and, in many cases, negative.”

Early survey data from 2015 revealed a halt to the upward sales price trend for cropland. “However, actual sales data from 2015 will determine exactly what impact two years of low commodity prices have had on quality cropland values,” he said.

Duration of downturn

“The outlook moving forward for cropland sales prices hinges on how long commodity prices stay low, how long input costs stay high and what happens with interest rates moving forward. Another low crop commodity price year may start a market correction for land sooner rather than later.”

Compared to the national average of 7 to 8 percent, the Delta states including Arkansas, Louisiana and Mississippi had an average annual appreciation of around 3.5 percent for 2011-14, according to the USDA Land Values Summary.

In Mississippi, the state’s agricultural land values saw an appreciation rate of 1 and 3 percent annually for 2011 through 2014. “In terms of overall dollar values, farm real estate averaged $2,950 per acre nationally, $6,370 per acre in the Corn Belt, $2,640 per acre in the Delta region and $2,340 per acre in Mississippi in 2014.

For more on agricultural real estate values, visit http://www.ers.usda.gov/topics/farm-economy/land-use,-land-value-tenure.aspx