Today's Land Market & How Tech is Changing It
As the grain markets have slumped, so have the prices for related inputs . . . some more than others. Land is one major farm expense in the Midwest that's declined in the last year, but not nearly as much as the corn and soybeans grown on it. Now, as a new year begins, the land market looks more and more like a safe structure in which market participants can seek shelter, whether it's from the volatility of ag markets or the financials. Yet, it's a different market than it's been in the last few years.
There's not a lot of land on the auction market right now as farmers and investors look to sustain value wherever they can in a time when grain prices continue their generally lower movement. Still, though supply isn't as high, demand isn't exactly through the roof right now either, and that means there hasn't been a lot of justification for a major shift in values despite lower corn and soybean prices. The net result: Those farmers who are in growth mode haven't exactly been knocked off that trajectory yet, at least according to recent research from Farmers National Company, an ag real estate company based in Omaha, Nebraska.
"While lower grade land has seen drops in value near 15% from recent highs, top-quality crop and grazing land still bring solid prices as owner-operators and investors seek to expand their operations with the most productive land,” according to Farmers National Company vice president Randy Dickhut in a company release. "Land is viewed as a long-term asset and owners consider agricultural land a stable investment in a changing world."
Demand hasn't fallen a lot, though where it's fallen and by how much does vary geographically. Ultimately, buyers -- be them investors or farmers -- aren't taking bids as high as they were willing to just a few months ago.
"Buyers are being more realistic when considering land purchases which has reduced the fervor of rapidly escalating prices seen at land auctions in recent years," Dickhut says. "Owner-operators continue to be the main purchasers of agricultural land, comprising nearly 90% of buyers in many areas."
Technology's growing role
One thing that's starting to work its way more into the farmland market is technology, namely in the information that new tools can track and generate on land that's for sale or rent. There's a growing expectation for things like production history, fertilizer records, tile data, and drainage. That data, just like geography and other factors, can heavily influence the sale price of farmland, says land sales association Travis Smock with Peoples Company.
"Farmers and investors are becoming more and more sophisticated in buying and renting farm ground and are demanding information on yield, fertility, and drainage before they will pay a premium for land," he says. "In today’s market, that could be the difference between a sale or a no-sale," he says. "Compiling and understanding all of the information associated with a farm can add value both annually and at the time of a sale."
Whether you're selling land or you're the one writing the check at the day's end, here are a few data points that are becoming more common among the information compiled in preparation of an auction, Smock says:
Current tile maps
Soil test data
The way this data is passed along to the new owner is a relatively new concern, too, Smock adds. Though these data points can influence the ultimate price tag for a piece of ground, whether it transfers to the new landowner -- and whether he or she will ultimately in fact own that data, too -- should be confirmed prior to a sale. That's because these factors represent a growing amount of value in the sale of farmland today.
"Compiling all of this information can make a large difference in the overall price of a farm when it is sold, or the cash rent numbers collected. A farm that has [this] data will traditionally bring a sales or cash rent premium over a similar farm with less information available. Many of today’s farmers have sophisticated data tracking software or have a working relationship with outside companies to provide them with data to enhance their yields," Smock says. "If a farm is being rented by a farmer, most of this information is rightfully owned by that operator. In those situations, the landowner conceivably should be writing language into their lease agreements allowing access to certain information if they decide to sell."