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Farmland Ownership Trends Shifting
Jeff Caldwell 08/06/2013 @ 9:15amMultimedia Editor for Agriculture.com and Successful Farming magazine. As farmland values have climbed over the last few years, it’s caused a slowing in a couple of key trends in who owns that land, shifts that could ultimately affect land accessibility for young and beginning farmers, according to one Iowa land values expert. Every five years, Iowa State University Extension farm management specialist Mike Duffy conducts a survey of farmland owners in his state. The survey has been conducted since the early 1980s, a time period that’s seen some major ups and downs in the land market. “The latest Iowa farmland ownership survey is compared to previous surveys dating back to 1982, during the time when farmland values first started collapsing after the boom of the 1970s,” Duffy says, adding that the full results of the survey will be released later this fall. “Looking at the various surveys over the past 30 years shows some of the changes in farming technology, demographics, and other patterns. The 2012 survey also shows the impact of the current land boom on these trends.” The sharp climb in land values since the last land ownership survey conducted in 2007 — a time when values in Iowa had more than doubled — has caused a couple of shifts in ownership that could carry implications for young and beginning farmers in the coming years, provided values are sustained. First, who’s owning the land? Last year, almost one third of Iowa farmland was in the hands of someone over the age of 75. That number has been ticking up since 1982, but just in the last five years since the sharp value climb, Duffy says there’s been a noticeable change. “The percent of land owned by people in this age category had been steadily increasing since 1982, when 12% of the land was owned by someone over 75 years old. The trend toward increasing age does appear to have been slowed by the boom,” Duffy says. “There are younger owners, although they represent a small percentage of the acres. Over half, 56%, of the farmland in Iowa is owned by someone over the age of 65.” Absentee land ownership has also declined in the last few years since the runup in land values. In 2012, 21% of the farmland in Iowa was owned by an absentee owner. That’s the same as in 2007, but up 15% from 1982. Duffy says the flattening of this number could also foreshadow a major trend shift. “Another trend that seems to have slowed is the percent of land owned by people who don’t live in Iowa full-time,” he says. “It appears that the higher land values had an impact on the ownership by non-Iowans.” These trends are important for all parties involved in farmland ownership and management, but mostly for those on the opposite ends of the age spectrum, Duffy says. This makes it important for those parties to watch them closely and take them into account in land purchase and lease agreements down the road. “Ownership of Iowa’s farmland and access to the use of the land is critical for the future of the State. The impact of the ownership on both beginning farmers and the retiring farmers will be crucial,” Duffy says. “The current situation with respect to farmland ownership in Iowa is a good topic for discussion among landlords, family or heirs, and agribusiness professionals.” Continue reading
Farmland Values Sway Owners
By: Amy Mayer Farmland values may begin to fall as commodity crop prices come down. This wheat grew earlier this summer in southwest Iowa. (Amy Mayer/Harvest Public Media) Buy? Sell? Hold? These are the options for cropland owners, whether they currently farm, are retired farmers or never worked the land themselves. How the recent high land values influence that decision obviously depends on a family’s particular circumstances. This connection was explored in our “Changing Lands, Changing Hands” series this summer. David Klein, vice president and managing real estate broker at Soy Captial Ag Servcies in Bloomington, Ill., said the market in Illinois has been stable. And that makes it attractive for buyers he describes as “believers in farmland.” These are people who would rather invest in land than leave their money sitting in a bank. “Right now there’s still a lot of cash being spent,” he said, as opposed to land being purchased with mortgages. Cropland values have gone up every year since 2003, except for 2009. And from 2010 to 2011 in the Northern Plains the USDA estimates the value of farm real estate increased nearly 27 percent. This sustained period of high values prompts some observers and economists to wonder whether farmland is in a bubble that is destined to burst. “Our farmland market here has continued to be pretty stable,” Klein said. He recently tweeted the sale of 240 acres of prime cropland in Edgar County, Ill., when it sold for $12,017 per acre. He said that’s a price right in the range of where Illinois land is selling, with some sales he calls outliers yielding as much as $15,000 to $16,900 per acre. Klein said investors looking to maximize return are more likely to buy larger tracts of land, at lower per-acre prices, while farmers may purchase “the farm next door,” spending more per acre on a smaller overall purchase. “Illinois did not rise as high as Iowa on some of the higher highs,” he said. Last year, a record sale in northwest Iowa captured $21,900 per acre. An article this week in the Wall Street Journal suggested cropland values may be in decline: Cropland values in the Midwest already are losing steam after a surge of nearly 80% in the past four years to an average of $6,980 an acre. The latest appraisals done by farm lender Farm Credit Services of America show that land-value gains slowed in the first six months of the year. Purdue University forecasts a decline in land values in parts of Indiana in the second half of 2013. For now, though, one result of the high land prices that Michael Duffy, an agricultural economist at Iowa State University, has noted is that young people are taking a different view of returning to a family farm business. “Our students here,” he said, “some of them, the 4.0 students, they’re going back to the farm. They see this as an opportunity.” Duffy said that is consistent with other boom periods in land values. Other young people from farming families may choose to hold onto inherited land that they have no intention of farming because they believe they can make money renting it. Duffy expects the data from the 2012 Census of Agriculture is likely to show growth in the percentage of farmland owned by people younger than 35. But, Duffy said, as commodity crop prices come down, land values will, too. “It is less certain the speed they will fall,” Duffy wrote in a paper for Iowa State Extension, “but it appears at this time land values will correct more slowly over a period of time.” So Duffy does not predict a crash like the farm crisis of the 1980s, but the best time to sell may have passed — at least for now. Continue reading
Fed: Farm Land Values Boom Shows Signs Of Slowing
Aug. 17, 2013 Written by Christopher Doering Gannett Washington Bureau WASHINGTON — Farmland values in the Midwest were stable during the second quarter of 2013, marking the first time they have failed to rise in four years, the Federal Reserve Bank said as bankers hinted the boom of the past few years may be coming to an end. The Federal Reserve Bank of Chicago said the average dollar value of “good” farmland across Iowa was flat for the April 1 to July 1 period. Despite the quarter, land values in the country’s largest corn and soybean producing state have jumped 18 percent since July 1, 2012 — reflecting the strong farm economy and booming demand for productive land. Similar to Iowa, land prices across other states covered by the Federal Reserve branch have seen sharp gains over the last year, but they posted mixed results during the second quarter. Land values in Indiana and Wisconsin rose 5 percent and 1 percent, respectively, but Illinois and Michigan had small decreases. Overall, the five-state region was unchanged during the second quarter with prices climbing 17 percent from a year ago. The last time farmland prices failed to rise was in the third quarter of 2009. “While the farmland values on a year-over-year basis still appeared to be soaring, changes in farmland values on a quarterly basis may be presaging shifts in the year-over-year pattern in the latter half of 2013,” said David Oppedahl, a business economist at the Federal Reserve Bank of Chicago. “Survey respondents reinforced this conclusion with their assessments that agricultural land values were likely to be flat in the third quarter of 2013.” The survey was compiled with input from 211 agricultural bankers, with 86 percent of respondents expecting stable land values through the end of September. One banker cautioned that land values would go down as grain prices fall. In recent years, record-high prices for corn, soybeans, wheat and other commodities have left growers flush with cash to purchase more land. And what the farmers don’t pay for out of their own pockets, historically low interest rates provided them with easy and cheap access to money to close the deal. But that appears to be changing. The Federal Reserve branch said interest rates on farm loans during the second quarter moved up for the first time since early 2011. And this week, the U.S. Agriculture Department estimated corn prices would average $4.90 a bushel this year, compared to $6.95 a bushel in 2012, with soybeans forecast to drop to $11.35 a bushel from $14.40. “The anticipation of lower crop revenues – especially when combined with potentially rising interest rates on farm loans – portended softness in future farmland values,” Oppedahl said. In Iowa, where rich soil, favorable weather and ethanol and livestock production help foster demand for limited growing space, farmland values have nearly doubled since 2009. Some prime real estate has sold for more than $20,000 an acre. An acre of farmland that a decade ago sold for an average of $2,275 went for about $8,300 in 2012, according to Mike Duffy, an economist at Iowa State University who watches land prices. Values have risen every year since 2000, with the exception of 2009 when they dropped 2.2 percent. Kyle Hansen, a real estate agent at Hertz Farm Management in Nevada, Iowa, said the drop in commodity prices – coupled with a cool, wet spring followed by a dry summer – has not left many farmers in a buying mood. “Some (farmers) look at what their income is going to be potentially this year or the following years when they are deciding whether they should be purchasing or not,” said Hansen. “That, too, will somewhat tame the aggressiveness of bidders at auctions. It’s somewhat of a flat market.” Hansen said farmers will probably wait until after the harvest when more is known about the output from this year’s crop and the resulting impact on commodity prices before deciding whether to resume buying land. If commodity prices are steady or higher, land values could post a “minimal increase,” he said, but if “commodity prices stay low we could see a retraction of land values.” Continue reading
