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Cost Of Farmland In South West Reaches An All Time High
Saturday, September 21, 2013 THE cost of farmland in the South West has reached an all-time high and prices are expected to continue to rise. The Royal Institute of Chartered Surveyors (RICS) published its half-yearly Rural Land Market Survey last week. It states the cost of farmland has jumped to £7,250 per acre between January and June this year, hitting a record high and just behind the national average of £7,441 per acre. On-going surge in demand, mainly from farmers keen to expand, has been blamed for soaring land prices. Fifty percent more surveyors reported increases rather than decreases in demand in the first six months of 2013. Gareth Rowe, an agricultural property valuer with Stags in Truro, said: “Here in the south west we are seeing continued demand, mainly from farmers, for good, well located blocks of land close to the farming base of the purchaser. “Good pasture and arable land is selling well at premium values where local interest is strong. However we are also seeing lower levels of interest, in some other blocks of poorer land, with lower levels of competition from amenity/investor purchasers in this market. This is leading to a growing variance in values and makes it important to know the local market.” Andrew Ranson, another land agent with Stags in Cornwall, said: “In addition, Stags are again seeing some increase in the demand for farms with a farmhouse. This is in line with the national picture, which shows surveyors’ price expectations for residential farms has turned positive for the first time since the second half of 2010. This looks to be consistent with the positive noises being heard about the general residential market.” “An example of this is Axford Farm at Callington which Stags have very recently sold. This was a well-equipped 215 acre dairy farm, with a 4 bed bungalow and permission for a second dwelling. It has sold well to a farmer moving down from Worcestershire. Many farmers were interested, particularly as the value of the dwelling was proportionate with the land values.” Read more: http://www.westbrito…l#ixzz2fnllVqAU Follow us: @thisiscornwall on Twitter | thisiscornwall on Facebook Continue reading
Illinois Land Climb Seen Leveling Off
Jeff Caldwell 08/29/2013 There’s been a lot of chatter lately about the leveling-off of farmland values in the coming months. New information released this week shows how far farm managers and other specialists think land prices might slip, whether or not it will unfold into a 1980s-style value meltdown, and some of the factors behind the market’s current standing. A survey conducted by University of Illinois Extension ag economist Gary Schnitkey and members of the Illinois Society of Professional Farm Managers shows the first half of 2013 saw an overall year-over-year increase of 2.5% to 3% for good-to-excellent land in that state, a definite slowdown from the last few years. “These prices are not at the level of increases we’ve seen in recent years, but they are still upward,” says Dale Aupperle, a farm manager with Heartland Ag Group in Forsyth, Illinois, and chairman of the Illinois Land Values and Lease Trends project. Sales volume dips Overall, land values ranged from $8,300 to $13,200 per acre for fair to excellent land across Illinois. The survey showed a definite shift lower in the amount of land sold compared to the first half of 2012, with late-year land sales accounting for some of that difference; 70% of those taking part in the survey said sales volume has been lower so far this year, and 77% said they expect that pace to remain or slow further. “There was a tremendous push on land sales at the end of 2012 because of uncertainties concerning income tax treatment in 2013 and beyond,” Aupperle says. “This led to a great deal of farmland being sold last year that might have otherwise been available to the market in 2013. As a result, there is still a demand for farmland but not much available for sale.” Buyers & change The vast majority (73%) of Illinois land sold in the last 7 months has been to farmers; local investors made up 12% of the buyers, while absentee investors took 8%. Among the state’s farm managers responding to Schnitkey’s survey, the majority who see lower land prices in the next few months believe the slide will be slight. “Respondents were divided in what was expected to be the price change over the next 12 months. Twenty percent expect farmland price to increase, 41% expect farmland price to remain the same, and 39% expect farmland price decreases,” according to a report from the Illinois Society of Professional Farm Managers. “Of the 39% expecting decreases, 77% expect a price decrease from 0% to 5%.” Factors in play Corn prices, the farm bill, ethanol and macroeconomic factors like inflation are all big variables comprising the direction of farmland values in the coming months, Schnitkey’s survey reveals. “Most likely factors of occurring are ‘corn prices fall to $4.50,’ ‘subsidies on crop insurance are reduced,’ ‘Farm Bill does not pass,’ and ‘interest rates increased by 2%.’ Factors least likely of happening are ‘inflation increases by 10% and ‘interest rates increase 5%,'” according to the Society’s report. “If they happen, the factors indicated of having the most positive impact on farmland prices are ‘U.S. economy grows 5%’ and ‘inflation increases to 10%.’ The factors estimated to have the most negative impact on farmland prices are ‘Corn prices fall to $3.50,’ ‘interest rates increase 5%’ and ‘Ethanol mandates are removed.'” Rent effects Though most expect land values to remain slightly higher in the coming months, Schnitkey’s survey reveals the same’s not true for land rents. Average rents are expected to slide by a few percentage points for the 2014 crop year; excellent quality land rented for $388/acre this year, but will likely go for $374 in 2014. Good land rented for $332/acre but will rent for $318 next year. Cash rent agreements remain the largest share of overall rental structures (35%) though shared rents make up 25% and 14% of rented land is done so via a variable cash arrangement. “Respondents indicated that share rent and modified share rent lease leases declined in use,” according to the Illinois report. “Variable cash rent leases were the lease types with the largest increase, followed by cash rent.” Continue reading
Tips To Handle Today’s Farmland Market
http://www.agricultu….jpg&type=admin Jeff Caldwell 09/23/2013 Looking for proof the farmland market is starting to plateau? Look no further than the fields of Iowa, where the often-foreshadowed plateau in land values seems to be reaching fruition, at least in parts of that state, new information shows. Iowa has seen a meteoric rise in land values in the last few years, some say more so than other Corn Belt states. Now as the costs and returns for a crop start to converge and factors like taxes start to compel landowners to keep their hands on their land, prices are starting to hit the plateau experts say has been on its way for months. “The dynamics of the farm market, specifically inputs, have rocketed. Cash rents have not kept pace with the profits farmers have gotten. People are wondering what will happen with cash rents,” says Randy Hertz, accredited farm manager and land consultant with Hertz Farm Management, Inc. “There are just fewer farms on the market now. The reason for that is when you’ve got a land market that increases in value, people don’t want to pay taxes on that increase. And you’ve got low interest rates. They say ‘I’m earning 3% to 3 1/2% on rented land. What would I do if I sold? I’d have to pay tax on $9,000 an acre in capital gains. You’re going to pay one-third of that in taxes, plus the privilege of 1% on a CD. So, you’ve seen a lot fewer farms for sale.” Recent data show that three crop-reporting districts of Iowa — the Corn Belt state that’s seen the greatest volatility in land price shifts in the last few years, Hertz says — saw a tapering-off in their climb in value: Northeastern, southwest, and west-central Iowa. Much of that slump has come as a result of commodity prices slipping, interest rates, taxes, and a continued lack of “stable alternative investments.” This is compelling landowners to hold tighter onto their land in many cases, says Kyle Hansen of the Iowa Land Realtors Institute, leader of a statewide survey of farm managers, rural appraisers, and ag lenders. The leveling off in land values isn’t quite yet reaching every corner of the Corn Belt, though. Even if prices stay in the black for the coming few months, that doesn’t mean the reversal in Iowa won’t spread to other major corn- and soybean-growing parts of the nation’s center. “These prices are not at the level of increases we’ve seen in recent years, but they are still upward,” says Dale Aupperle, a farm manager with Heartland Ag Group in Forsyth, Illinois, and chairman of the Illinois Land Values and Lease Trends project, which recently conducted a similar survey of land values in that state that showed values are still climbing, but leveling off in their rise. If the boat does tip, and values do dip into the red, how far might things go? “While most bankers expected farmland values to remain at current levels, an increasing number of respondents felt farmland values may have peaked. Compared with previous surveys, fewer bankers expected farmland values to keep rising. More bankers also expected farmland values to drop after harvest likely due, at least partially, to expectations of lower farm income,” says Nathan Kauffman, economist with the Federal Reserve Bank of Kansas City. “Among bankers anticipating a decline, though, a majority of estimated farmland values would fall less than 10% during the next year. Very few bankers expected that farmland prices would drop more than 10%.” So, what should you do? Hertz recommends three things to help navigate a shaky farmland market: Maintain a buying position. “As people get panicky, they may be willing to take a lower price or offer lower than the general public really would anticipate. It’s an emotional decision,” he says. Continue making cash grain sales. Doing so will help you keep a consistent income streaming in, regardless of where the land market is going and how those sales may affect your ability to secure more land. “How could you ever look a gift horse in the mouth? We can sell new-crop soybeans for over $13/bushel cash. Those are phenomenal prices. Yes, we’re going to get kicked in the shorts with our soybean yield, but you still have to sell the stuff,” Hertz adds. “You’ve still got to make a decision.” Look again at land rents. “If you had not increased along with where it should’ve been, you probably should’ve gotten an increase. If you were pretty good but not at top of the market, rent will probably be pretty good next year. If you were at the high for cash rent last year, probably adjust downward,” Hertz says. Continue reading
