August 19, 2014
As the summer winds down another farmland selling season kicks off. From what I have read most of the experts are predicting a decline in farmland
values, but unlike the mid-80’s, of a more gradual nature. Rabbobank’s report included later in section one indicates that the driving forces behind
the run up in values in recent years has been low interest rates, high commodity prices and limited availability of land for sale.
The view from the cheap seats where I sit is only one of three has significantly changed recently, commodity prices. Yes they have taken a dramatic
hit, but for 2014/2015 the farmer will have more bushels to make up for the loss in dollar per bushel. Interest rates have risen some, they are still
relatively low and though there is talk of a gradual rise in rates for 2014/2015 not that substantial of a rise to dramatically affect what one can or is willing
to pay for the” right farm”, the key word here is right farm. (Also don’t forget our government sure doesn’t want to see much of an increase given its debt
and tight budgets. That is the conspiracy theory side of me coming out). As far as the availability of land to buy, I don’t see a large supply coming on the
market anytime soon from an already well picked over market. Farmers have been the largest buyer in recent years and most farmers have their financial
house in order. They are more likely buyers for the “right farm” than sellers. Also I think it is fairly safe to say that for the most part, the average absentee
farmland owner is not of the Wall Street Investor mentality, short term or buy/sell/buy/sell. Rather they bought it or inherited it and plan on keeping it
through the peaks and valleys for their lifetime. The one major seller I see is trusts and estates. My guess is that there will be a slow steady supply over
the next several years from trusts and estates.
In the short term (next year maybe two) I think we will see a plateau to small decline for the average values, but many individual sales being very
choppy. I say choppy because I think some sales will bring prices near the highs of recent years for the better farms or “right farm” in an area in the heart
of the Corn Belt. Others sales will bring substantially less than what it would have brought just a year or so ago, those with problems (too wordy to describe
here). A big part of this will be determined by who your neighbors are again referring to the “right farm”. This is the best I can discern from the
cheap seats. Evan Lemenager, AFM; Principal
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