Frontier Farm Credit Reports Second Year of Overall Decline
OMAHA, NEBRASKA -- (January 13, 2016) While cropland values generally held steady or showed slight declines in the last half of 2015, farmland prices overall ended lower for the year in eastern Kansas, Iowa, Nebraska, South Dakota and Wyoming. This marks the second consecutive year that lower commodity prices have put downward pressure on farmland values.
Frontier Farm Credit and Farm Credit Services of America (FCSAmerica) compile thousands of farm real estate transactions and monitor 71 benchmark farms twice a year to provide the most comprehensive data on farmland values in the five-state region. The most recent update to the long-running farmland study is based on data from July 1, 2015, through December 31, 2015.
The significant decline in farmland prices anticipated by some forecasters since the market's 2013 peak has not fully developed, with drops in commodity prices outpacing declines in farmland values to date. But the impact of lower profit margins is reflected in adjustments to the market for both cropland and cash rental rates.
"There is a heightened attention by producers to their cash flows and how to position their cost of production at a level to align with what appears to be corn prices in the $3.25 to $4.25 range for the foreseeable future, barring a drought or some other unexpected demand or supply-side event," said Mark Jensen, senior vice president and chief risk officer for Frontier Farm Credit. Fortunately, many farmers are in a strong financial position resulting from previous record profit years."
The range of decline in cropland values is wide. Some regional areas have experienced little to no change, while others have seen farmland prices drop 20 to 30 percent. Jensen cautions that average values can be somewhat misleading.
"Specific regional influences, such as the quality of the cropland and local interest, can play a big part in the final sale price," he said.
Below is a state-by-state snapshot of farmland activity through the end of 2015:
Eastern Kansas Cropland values dipped during much of the year, but rebounded to levels comparable to the fourth quarter of 2014. The average per-acre price in the eastern part of Kansas was just shy of $5,000 at the close of 2015.
Iowa The average price of $8,682 an acre in the fourth quarter of 2015 was comparable to values in the previous year, but still 14 percent below peak 2013 prices. The average quality of purchased land also improved during 2015, indicating the uptick in per-acre price was driven more by quality than the market. The highest dollar per-acre sale during the fourth quarter was $18,100. However, only 18 percent of all fourth quarter sales exceeded $10,000 per acre. This was down from 26 percent in 2014.
Nebraska Average benchmark values held steady in the last half of 2015 and declined 2.4 percent for the year. Five of 18 farms increased in value, while three showed no change. The farms that decreased in value declined an average of 4.2 percent.
South Dakota Prices for unimproved cropland rose in the fourth quarter of 2015, finishing the year at an average per-acre price of $5,500, second only to the 2013 record high of roughly $6,100 an acre. The number of sales in 2015 declined 28 percent compared to 2014.
Wyoming Completed sales were down 52 percent compared to 2014, making it difficult to identify trends from a small and diverse base of transactions. Sales that did occur, however, were for an average per-acre price of $1,000 in the fourth quarter of 2015, down from the $1,400 average that held steady during the previous four quarters.
About Frontier Farm Credit Frontier Farm Credit is a customer-owned financial cooperative proud to finance the growth of rural America, including the special needs of young and beginning producers. With $1.88 billion in assets and $357 million in members' equity, Frontier Farm Credit provides credit and insurance services to farmers, ranchers, agribusiness and rural residents in eastern Kansas. Learn more at www.frontierfarmcredit.com.