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Farmers National: 2015 is Key for Land Market

With tight to negative margins continuing to pressure farmland prices, this year could be pivotal for farmland prices, according to an official at Farmers National Company based in Omaha, Nebraska.

“Harvest results of 2015 will make it a pivotal year, which could impact the land market for several years,” said Randy Dickhut, AFM, vice president of real estate operations at Farmers National Company. “Farm and ranch income will drive the direction. A great deal could happen between now and November.”

Farmers National Company statistics show the volume of properties for sale is down 40% over the past six months, as compared with the past two years. “The current level of available land is having a real impact on farm and ranch operations looking to expand,” said Dickhut. “Demand is still good for quality land. The market just isn’t as aggressive as in the past few years, so values are drifting sideways to lower.”

The market slowdown can, in some ways, be blamed on the absence of tax policy changes, which helped prompt sales this past year to some degree. While land values are down nearly 10% in most areas, price softening is happening at different rates in each region. For example, sales in the Northwest have been brisk, as the California drought is driving activity north. The Southern Delta region hasn’t seen much decline, while parts of the Midwest are experiencing significant drops in value.

In Iowa, for example, high-quality nonirrigated land averaged $12,250 in June of 2014 while in June of this year, it sold for $11,000 an acre, on average. Top land in Illinois saw a similar change, from $12,500 an acre in June of 2014 to $11,600 an acre in June of 2015. See more recent land prices in the articles below.

While current buyers are predominantly active farmers and ranchers adding land to their operations, interest from investment funds and individuals is on the rise. In addition, generational land transfers continue to play a large role in market movements, as many inheriting land choose to sell.

“With the softening of land values, some investors are looking at this as an opportune time to buy,” said Dickhut. “Land is considered a low-risk long-term investment, so we will see these types of buyers jumping into the land market more and more over the next several years.”

Demand for cropland and grazing land from owner-operators remains good, but buyers are being more realistic in what they will pay given lower grain prices. Land professionals are recommending that sellers be more realistic in evaluating the quality of their land and the expected selling price in order to have a successful sale.

Farmers National Company, an employee-owned company, is the nation’s leading agricultural landowner services company. Farmers National Company currently manages more than 4,850 farms in 24 states comprising over 2 million acres. The company has sold over 3,700 farms and more than $2.65 billion in real estate during the last five years. Additional services provided by the company include auctions, appraisals, insurance, consultation, oil and gas management, lake management, a national hunting lease program, forest resource management, and FNC Ag Stock. For more information on land listings in your region, visit the Farmers National Company website at FarmersNational.com.

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