Low capitalization rates and increased farm incomes have contributed to the 2011 increase in farmland values, according to a survey released by Northwest Farm Credit Services in Spokane, Wash.
"Throughout the Northwest, most transactions are between landlords and tenants with a few properties being exposed to the open market," reports NFCS Risk Management Vice President Roger Cramer, who also heads up the service's appraisal services department.
"Strong commodity prices and favorable interest rates continue to fuel optimism in the agricultural market. The higher commodity prices have attracted institutional investors, real estate investment trusts, and individual investors to the market for agricultural properties in the more productive areas of the region."
Cramer reports that sales activity in the Northwest has increased in the first six months of the year, though not at the steep increased prices of the Midwest ag land sales activity.
NFCS's survey is based on real estate and sales activities that are monitored by the Service's appraisers throughout Idaho, Montana, Oregon and Washington. The following are appraisers' observations during the first six months of 2011:
Strong commodity prices and favorable interest rates have increased the purchasing power of producers. Local producers expanding their land holdings and out-of-area buyers remain the primary market participants. While most interest comes from established operators, activity from institutional buyers has increased in areas of eastern Idaho.
Areas of Montana that were previously influenced by development and recreation continue to show declines. The weak economy and unemployment continue to trouble toe market for rural residential and part-time farm properties. Markets in more traditional agricultural areas are seeing the most activity.
Supply in the agricultural market remains low with properties selling readily if offered at market-supported prices. Most transactions are between landlords and tenants with few properties being exposed to the open market, creating a decrease in listings.
Most properties with strong agricultural production histories are being purchased by two types of buyers. First, the established farmer looking to expand operations, and second out-of-area investment firms seeking to diversify their portfolios through investment in ag properties.