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Farmland Values Stabilize in 2017 in Grain Belt States

Farmland values stabilized in 2017, a reflection of continued market demand for quality land in states served by Frontier Farm Credit and Farm Credit Services of America (FCSAmerica).

Sales of higher quality farm ground contributed to an uptick in average sale prices in 2017. Where prices dropped at local or regional levels, sales generally involved lower quality land. Average sale prices rose slightly in eastern Kansas, Iowa, Nebraska and South Dakota. Wyoming had too few sales to identify a trend.

FCSAmerica, in association with Frontier Farm Credit, compiles sales records and, twice a year, appraises 71 benchmark farms. The cooperatives’ objective is to track real estate values without the influence of changes in land quality on sale prices. Iowa and Wyoming saw modest overall increases in real estate values in 2017, while eastern Kansas, Nebraska and South Dakota declined.

Below is the average state-by-state change in benchmark farm values through 2017. The number of benchmark farms in each state is indicated by parentheses.

State Six Month One Year Five Year Ten Year
Iowa (21) 1.4% 1.8% -12.8% 82.1%
Kansas (7) -0.1% -3.2%
Nebraska (18) -2.8% -2.8% -5.1% 130.2%
South Dakota (23) -1.3% -3.1% 15.6% 123.3%
Wyoming (2) 2.5% 3.2% 38.5% 30.1%

“Overall real estate values have stabilized in the past year, but continued low profit margins and potential for an increase in sales activity could put downward pressure on real estate values,” said Tim Koch, chief credit officer for Frontier Farm Credit and FCSAmerica.

Farmland values remain well below the market’s peak of three to four years ago. Overall, values are off about 20 percent.

EASTERN KANSAS

One benchmark farm increased in value, four declined and two were unchanged. The 3.2 percent decline in overall value for 2017 was due largely to the sole irrigated cropland represented among the benchmark farms. The value on the irrigated ground dropped 21 percent. Frontier Farm Credit has been tracking farm values since January 2015, when it began operating in alliance with FCSAmerica.

Public land auctions declined 31 percent compared to 2016 and total sales were down 46 percent.

The average price on completed sales by quarter:

KS Cropland Values

IOWA

Eleven benchmark farms saw an increase in value in the last six months of 2017, while 10 showed no change.

Overall farmland sales activity was down 20 percent. However, public land auctions increased 2 percent compared to the previous year. The percent of auction sales fell to 2.7 percent, down from 3.2 percent in 2016.

IA Cropland Values

NEBRASKA

Five benchmarks farms increased in value, while two showed no change. The remaining 11 declined an average of 6.1 percent.

Total sales declined in 2017, with dry cropland dropping 15 percent and irrigated 25 percent compared to 2016. Public land auctions dropped 16 percent and auction “no sales” increased to 5.2 percent, up from 2.2 percent in 2016.

NE dryland Cropland Values

NE irrigated Cropland Values

SOUTH DAKOTA

Values were unchanged on 14 benchmark farms in second half of 2017. Three farms saw an increase and six declined.

Total sales were down 18 percent compared to 2016. Public land auctions were down 16 percent and “no sales” increased to 6.1 percent, up from 3.2 percent.

SD Cropland Values

WYOMING

The one cropland benchmark farm increased in value by 5.1 percent. The pasture unit saw no change in value in the last six months of 2017.

Sales have been and continue to be very limited in Wyoming.

Farm Credit Live from Trade Talk

Courtesy of The AGgregator, Farm Credit

By Karen Macdonald

From Farm Credit AGgregator

Today, ag journalists at the National Association of Farm Broadcasting (NAFB) convention in Kansas City, Missouri, are stopping by the Farm Credit booth to interview Mark Jensen and Carl Horne with Frontier Farm Credit and Tanner Ehmke with CoBank, which finances ag exports as well as cooperative and rural infrastructure providers.

Here is a preview of some of the insights and expertise on industry trends, challenges and opportunities you might hear in coming days on regional and national ag broadcasts:

International market forces are dramatically impacting domestic grain producers, says Ehmke, a senior economist.

“So far this year, exports have been excellent, in large part because our major international competitors all faced production issues: Brazil with corn, Europe with wheat and Argentina with soybeans,” Ehmke says. “Looking forward, Argentina, Brazil and Russia are all expected to increase their production over the next few years. With the dollar as strong as it is against their currencies, it will grow difficult to compete on the export front.”

Ehmke points out bright spots domestically: grain elevators benefit from the demand for storage, wheat is working its way into the livestock feed mix and ethanol production is at a record high. According to Ehmke, the challenge for producers will be to recognize and take advantage of rallies, which will be brief. Producers will need to know where their profit point is so they know when to sell their inventory.

Jensen, chief risk officer, points out that Midwest commodity producers are facing high cash rents, high overall costs of production, significant levels of machinery debt and increased living expense. Many producers are well-positioned in terms of cash flow and liquidity, but some who were not as strong financially are bearing more of the brunt of the current market cycle.

“We’re working with our customers individually to help each assess their operation and their financial position today, and how they’ll be positioned over the next few years,” Jensen says. “For those in less favorable positions, we’re helping them figure out how they can reduce costs to a more viable level to weather this cycle.”

One ongoing issue is land values, which trended up for many years but are now seeing a lot of variability, though Jensen expects values to regulate over the next couple of years. Dropping land values can mean lower cash rent costs for producers who lease but can signal hardship for owners. In Iowa, for example, 65 percent of farmland is owned by those older than 65 years and nearing retirement, so the upcoming land transfer will be significant. Such an unprecedented land transfer in sight represents a tremendous opportunity for many.

Some purchasers of the land coming available may well be young, beginning or small farmers. Horne, young, beginning and small program and outreach manager, says that there’s a lot of reason to be optimistic. Even in difficult times like what the grain sector is facing, there is much opportunity for those who are prepared.

“Beginning farmers are actively taking advantage of the vast amount of information available to them in today’s environment, gaining more insight and creating more collaboration,” Horne says. “This means we have producers today who are better prepared than ever to access the information that’s available, sift through it, and find perspectives to help them make better decisions about identifying and capitalizing on new market opportunities.”

Horne recommends that all producers – beginning producers in particular – also build a network of advisors, including their lender, accountant and other producers. Sharing information, asking questions and soliciting opinions on new ideas can help identify opportunities worth pursuing, even in a challenging market environment.