Farmland poised for more big gains in 2013
CHICAGO, Illinois (Agriculture.com) -- Flush with cash, many U.S. farmers have already become active this year in purchasing land or paying higher cash rents. Because of the intense buying interests from farmers and institutional investors, farmland could see another 15%-20% jump in value in 2013, licensed farm managers, lenders and real estate brokers told a group of investors Monday.
The Chicago Farmers Group hosted the land value specialists at its monthly meeting in Chicago.
Along with good farmer earnings in the last 5 years, significant cash in the farm sector and increasing cash rents are all contributing to the upward trend in farmland values, according to Michael Morris, 1st Farm Services, Bloomington, Illinois.
Since last year’s harvest, when farmers knew of their money flows, the U.S. Midwest has seen a spike in land markets. “In Illinois, the land market was pretty flat from spring to fall. But, once the farmers had inventory and knew what the crop prices were, knew what crop insurance payments were, people started buying. So, we saw another 15% to 20% jump in benchmark prices,” Morris says.
If a good farm comes on the market, it sells fairly quickly. In central Illinois, land prices can reach as high as $12,000 to $17,000 per acre. “There are certainly some strong prices out there,” Morris says.
Land value projections
From July 1, 2012 to July 1, 2013, Morris sees farmland prices increasing 15%-20%, for the third year in a row. “If you look back three years, you could say there has been a 50% increase in land values,” Morris says. It’s been driven by commodity prices and cash rents.”
Bruce Ahrens, vice-president of marketing for Farmers National Company, Iowa City, Iowa, says that his company sold a record amount of farmland from October-December 2012. “Before the first of the year, increased sales were due to the capital gains tax laws. But now, land prices are going even higher due to a limited supply.
In Iowa, farmland is being purchased for over $12,000 per acre, Ahrens says. There are one-time sales that are going higher. But, a good piece of farmland is going for around $11,000-$12,000.
In Indiana, farmland values are seeing similar sharp increases. But, instead of spending $14,000 per acre for the land down the road, more farmers are improving the land they have, says Doug Deininger, managing broker for Capital Agricultural Property Services, Inc. “There is a trend about buying additional farmland. It’s all going back to the economics of corn and soybean production vs. location of the land,” Deininger says.