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Survey Shows Farmers, Ranchers Are Passing on Land

Decreasing farm profits are letting investors back in the land buying game.

A report just issued by Farmers National Company suggests that farmers and ranchers – the folks buying much of the available farmland and pasture the past few years – are backing off aggressive bidding.

Farm and ranch profits are down and lenders are being more careful in what they will lend on land purchases. Furthermore, investor interest in farm and ranch land declined as land values moved higher during the last four to five years and the return on investment slipped. But individual and fund investors are moving back into the land market as land prices soften. 

Overall average values of crop ground and grasslands have slipped from the highs of several years ago but are still historically strong, according to Omaha-based Farmers National Company.

Where are Land Values Heading?

“The agricultural land market is in a time of equilibrium as the supply of land for sale is fairly in balance with the demand to buy land,” said Randy Dickhut, senior vice president of real estate operations for Farmers National Company. “The supply of ag land for sale is generally on the low side of normal as some landowners are deciding whether to sell now or keep their land. Demand to buy land has trended lower over the past few years as buyers are being more cautious.”

Farmers National Company reports that, overall, demand for good land remains solid, but interest in lower quality crop ground and grassland is less in most areas.

“With the supply of land for sale being on the low side, the land market is stable at this time. Yet, factors affecting land values can surface over the next few years to move the land market in either direction,” Dickhut said.

For instance, if the supply of land for sale increases due to lower crop and livestock profits, or landowners decide to sell now for various reasons, the land market equilibrium could pressure land prices lower. Demand to buy land by farmers and ranchers will change with profitability forecasts, he adds.  

Changing macroeconomic factors affecting interest rates and alternative investments could change the demand for land either up or down. Besides economic considerations, there is always a reason to sell or buy that may end up being more important than where land values are at during any given time.

 

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