Positive income results for farms, combined with a tight land supply, have buffered economists' previously projected downturn of farmland values, Farmers National Company said this month.
Farmers National Company recorded strong real estate sales for the first half of 2014, it said, though down somewhat from record sales experienced in 2013.
"The big story is that the land market is stable, despite projections that farm income and land values would drop," said Randy Dickhut, AFM, FNC vice president of Real Estate Operations.
"The anticipated large drop in farmland values hasn't happened, as farm incomes were stronger than expected going into 2014. Original income projections of 20% below last year were not realized."
In late 2013, forecasters were pessimistic for the year ahead. However, Dickhut said economic trends and key market factors shifted in a way that paints a more positive picture for this year.
Grain prices and farm incomes actually stabilized land prices going into 2014, he says.
"While there are no record-setting top values currently, land prices are not going down significantly," Dickhut said.
While land values nationally are slightly down a few percent or stable , Dickhut said values overall remain historically strong. The northern plains area has experienced the most softening of land values due to weather conditions and lower commodity prices last year. Still, good quality farms sell well as demand continues from buyers.
In contrast, the delta region has experienced land value increases of 13% due to good crop production.
Regionally, land prices remain fairly stable compared to the double-digit price increases seen in recent years. Prices per acre for high quality land range nationwide from $3,500 to as high as $12,500 per acre in parts of Indiana, Illinois, Iowa, and Nebraska. Values in the Upper Midwest remain strong overall with sales reaching $9,000 per acre in some locations.
As demand rises, prices for grass land continue to increase in places like Nebraska and Texas. Livestock producers are rebuilding depleted cattle herds, which puts pasture land at a premium. Reduced feed costs for livestock have helped boost income levels in this ag sector, allowing operators to acquire land.
"The 2014 outlook for farms remains positive," said Dickhut. "Farm owners continue to search for high quality land to expand their operations."
Next: Regional outlooks >>
Kansas and Oklahoma
The market for high quality cropland remains steady throughout the High Plains with stronger values in the western part of the region. Overall area values are holding steady with some slight reductions from values 18 to 24 months ago.
Prices for irrigated high quality cropland in the area are variable, but range between $3,500 and $6,000 per acre, while the range for non-irrigated land is $2,000 to $4,000.
Looking ahead for this region, FNC predicts cropland will remain steady or see potential reductions in value based on market factors. Values will remain tied to land quality and location.
Iowa and Minnesota
Selective demand for high quality farmland continues as prices have leveled somewhat in the north central region, including Iowa, Missouri, Minnesota and South Dakota.
In Iowa, top quality land is selling at more than $12,000 per acre, while Minnesota values are reaching $9,000 per acre.
Economic factors contributing to current land values in this area include slow commodity trading. Property price levels to date have not been impacted by the ethanol mandate.
North Dakota, Eastern South Dakota and Western Minnesota
Auction activity for land sales in North Dakota, eastern South Dakota and western Minnesota has tightened compared to 2013 with more transactions going to private listings
Average to good quality land in the area is selling in the $5,000 to $6,000 range per acre, while excellent land is in the $6,000 to $9,000 per acre range. Top quality land in South Dakota is pulling up to $8,100 per acre, while North Dakota is coming in at $7,200 and Minnesota at $9,000.
Colorado, South Dakota, Nebraska and Wyoming
Since January 2014, the wide region covering Colorado, western South Dakota, Nebraska and Wyoming has seen a high level of land sales activity. While land values have not increased significantly, they are still at a steady high level.
Prices in these regions are ranging from $4,500 to $12,000 per acre for high quality tillable acres, with location, soils and topography dictating price. The range varies from west to east as well as by water availability and type of irrigation. There is a wide range of land values per acre depending on quality and if irrigated.
Next: Midwest, South and Washington >>
Illinois, Indiana, Ohio, Southern Michigan, Eastern Kentucky and Eastern Missouri
Quality farmland in the east central region continues to bring strong prices in most territories and supplies are limited with demand steady.
While quality land still leads demand, regionally there have been signs/indicators of a slight market correction as values have dropped on some property types 2% to 4% in general.
Potential sellers may put land on the market if they feel values are starting to peak. Rising interest rates could be a concern to the overall market values, as with crop production volumes later in the year.
Top prices in the region can be seen in Illinois at $12,500 per acre on average for high quality land. These levels are followed by Indiana showing values up to $10,000 per acre, and Ohio, which is at $8,000 per acre.
Arkansas, Mississippi, Missouri and Texas
Activity in the southern region overall remains brisk, fueled by low supply of quality land for sale and continued high demand. Year-end figures for 2013 in Texas indicate an overall price increase of nearly 10% over 2012 prices.
The Texas statewide, size adjusted average price was $2,160 per acre. Quality land for sale in all classes, is moving quickly said Mike Lansford, Farmers National Company area vice president for the southern region, Fort Worth, Texas.
Buyers for productive farms are still available. Prices for top farm land are averaging $5,000 per acre in Arkansas, $3,600 per acre in Tennessee, $3,500 per acre in Texas and $5,000 per acre in Mississippi.
Washington land buyers continue to outnumber those who are willing to sell, creating a continued demand keeping prices strong for top quality properties.
Farm operators adding to their holdings and investors make up the buy side of the land market. Sales overall are still strong and auctions are driving prices.
Irrigated land in the area is currently averaging $7,850 per acre. Non-irrigated cropland is currently seeing prices near $1,300 per acre average for all types of farms, according to Sayre. She noted that land in the eastern Palouse area is bringing prices as high as $3,500 per acre at auction. Prime farmlands in the Columbia Basin region are bringing prices at or above $10,000 per acre.