Tag Archives: values
Iowa Farmland Values Increase
Updated: Oct 03, 2013 By Dan Howell – email Iowa farmland values increased 10.6% and the value continues to be on the rise, but slowing a bit according to the Iowa Farm and Land Chapter #2 Realtors Land Institute. They reported that the statewide average increase of cropland values of 10.6% for the year from September 1, 2012 to September 1, 2013. This follows an average increase of 18.5% for the year from September 2011 to September 2012; and an average increase of 32.6% for the year from September 2010 to September 2011. Overall, the strong upward movement in land prices has leveled out even though we have seen growth in values over the past six months especially in the East Central District, which covers much of the local market area. “Clearly the decrease in commodity prices and the potential for highly variable yields are slowing the increases in land value especially in medium to lower quality farms,” said Eric Schlutz, Realtor with Ruhl Farm&Land and Muscatine Manager for Ruhl&Ruhl REALTORS. The survey also attributed the current land values to an increase in long-term interest rates, 2013 growing conditions, a lack of stable alternative investments, large amounts of cash on hand and the limited amount of land on the market. Continue reading
Looming Interest Rate Hikes Greatest Threat To Farmland Values
From Rabobank • In the short-term, strong farmer balance sheets and high rental rates will support current levels. • However, decreasing commodity prices will keep the values from accelerating as rapidly as they have been. U.S. farmland is still competitive with alternative investments, but the era of extremely low interest rates and extraordinarily high commodity prices is apparently coming to a close, according to a new report from the Rabobank Food & Agribusiness (FAR) Research and Advisory group. “We’ll likely see lower commodity prices this year, but they aren’t going to be low enough long enough to substantially impact land values over the coming year or so,” says Rabobank Food & Agribusiness Research and Advisory (FAR) senior analyst, Sterling Liddell. “In the short-term, strong farmer balance sheets and high rental rates will support current levels. However decreasing commodity prices will keep the values from accelerating as rapidly as they have been.” The report, “Land Values Peaking Out — But Not Down,” finds in the medium-term, the single greatest risk to U.S. agricultural land values is looming higher interest rates. Interest rates have been increasing through the first half of 2013, but based on the current Federal Reserve policy, a significant increase isn’t expected until 2014 or 2015. “We are entering an era where planning how you’re going to pay for your land is likely to become as important as planning for marketing your crop,” notes Liddell. The report forecast finds a decline in land values in the central U.S. of 15 to 20 percent over the next three years. In the Western and Southeast U.S., the decline will be less marked than in the Midwest. The key determinant in the susceptibility to land value changes is an area’s reliance on grain and oilseeds. While an increase in interest rates will have a similar impact on agricultural land values throughout the country, the amount of change will depend on the type of crop production and proximity to urban areas. Central U.S. Since the four dominant commodity crops (corn, soybeans, wheat and cotton) compete for the same acres in the Midwest, Plains and Delta regions, global grains/oilseed prices will be key factors in determining land values. As global stocks grow, prices will drop, leading to some decline in values over the next two to three years. Corn led the ramp-up Corn led the ramp-up in commodity prices and the associated increase in ag land values. As such, if corn were to fall below $4.50 per bushel for an extended period of time, a significant decrease in land values could follow. Western U.S. Vernon Crowder, senior analyst with FAR, co-authored the report and notes that in the Western U.S. agricultural land values are expected to move in the same direction as those in the Midwest. “The changes seen in land values in the West, especially those in California, should be less dramatic than that of the rest of the country,” said Crowder. “This is due in large part to the diversity of crops grown in the region.” Orchards, vineyards and irrigated land in the Western U.S. have seen extreme increases in land values due to strong market prices and growing export demand. Interest rates will be the primary determinant of any decline in the value of farmland, but the strength of the U.S. dollar is also important due to the rate of exportation for many commodities produced in the Western U.S. A stronger U.S. dollar will negatively impact exports. Southeast U.S. The Southeast U.S. has seen a modest appreciation of irrigated cropland, as it weathered a severe drought. Florida in particular is in the midst of a difficult era, due in part to weather, disease, increased competition from imports and influence of the struggling housing market leading to a lack of appreciation of farmland value. Expected increases in interest rates and declines in major cash commodities will lead to a difficult medium-term, especially if commodity price declines lead to a reduction in land rents. The full report explores the drivers behind the increase in ag land values, factors responsible for determining interest rate increases and regional variations. The full report is available exclusively to clients of Rabobank, Rabobank, N.A. and Rabo AgriFinance. For additional information, visit http://www.rabobankamerica.com . Continue reading
Farmland Values Notch Another Dramatic Rise
John Luke, The Times The Wietbrock family works to harvest corn last fall on their land near Lowell. Statewide farmland values have risen by as much as 19.1 percent over the last year, according to a recent Purdue University study. September 12, 2013 4:00 am • Joseph S. Pete joseph.pete@nwi.com, (219) 933-3316 Farmland values and cash rents have risen again this year, and Northwest Indiana has some of the highest prices in the state, according to a Purdue University study. Corn and soybean prices have recently started to wilt but had reached record highs after last year’s drought, causing farm incomes to shoot up. Higher prices drove up profits, and farmers also got insurance reimbursements for lost crops. The better-than-expected farm incomes, low interest rates and strong demand have helped push agricultural land values up by as much as 19.1 percent this year, compared to last year, the Purdue study found. Cash rents rose by 9.4 to 10.9 percent over the same period. “While the 2012 Indiana crop suffered from the worst drought since 1988, the increase in farmland values did not bother to slow down,” said Craig Dobbins, a Purdue Extension agricultural economist. The average price of an acre of top-quality farmland in Northern Indiana rose by 17.3 percent to $9,336 an acre in June, compared to $7,958 last June. Average and poor quality farmland increased by about 14 percent over the same period. The recent dip in corn and soybean prices may slow or stop the growth in land prices, and even cause slight declines in some areas. But the cost of farmland has been booming in recent years. Five years ago, a good tillable acre of Northwest Indiana farmland would have fetched around $5,000, said Gene Eldridge, a Porter County Realtor, who represents various types of real estate, including farmland. Today, the price has risen to an average of more than $9,300 per acre in the Northern part of the state, according to Purdue. “Crop prices are up, and the margins are there,” Eldridge said. “That drives up the price of the land, and what farmers are paying in cash rent.” Prices, however, may have peaked for now, unless corn prices hit a new plateau, said Craig Blume, regional vice president of Farm Credit Mid-America. Strong demand, bad weather and farmers who were willing to pay a premium for adjoining parcels drove up prices for the last few years. But lending caps have started to reach their upper limits, to the point where farmers would have to rely on income from land they already own free and clear to pay off purchases of more farmland, Blume said. “It’s stabilized,” he said. “It’s reached where it’s going to go for now.” Commercial development, which had been largely dormant during the downturn, accounted for part of the demand for land. “The transitional land market – that is, farmland moving out of agriculture – seems to have sprung back to life,” Dobins said. “This is a specialized market, with transitional land value strongly influenced by the planned use and location.” Cash rents grew to $310 an acre from $277 an acre last year for top-quality farmland in Northern Indiana, which is a gain of 11.9 percent. Rent prices grew more modestly for average and lower quality farmland, increasing by 7.1 to 8.1 percent over the last year. Researchers came up with the estimates after surveying more than 260 land appraisers, agricultural loan officers, farm managers, farmers and Farm Service Agency personnel. Continue reading
