Farmers National Company Expert Discusses Year Ahead
OMAHA, NE (MO.Properties) The land market in 2019 continued the plateau trend of the past several years in which the supply of agricultural land for sale on the market remained lower than average and prices for good quality cropland held mostly steady. Looking ahead to next year, will financial stress from lower commodity prices and poor harvests in some regions cause prices to decline?
Farmland sale activity in the first part of 2019 was slower than it had been for some time with late spring and early summer especially void of farms for sale. Planting delays and prevented plantings contributed to the lackluster activity.
“Despite the slower land market, Farmers National Company and its agents saw a 25 percent increase in acres sold in 2019 from the prior year and the most since 2014. Sellers are seeking the best advice and marketing strategy to sell their land and that is why the amount of land listed for sale at Farmers National is very strong at over $300 million,” said Randy Dickhut, senior vice president of real estate operations.
Land values in 2019 once again bucked the prevailing depressed mood in agriculture to hold steady or even increase slightly in some instances except for the most stressed areas or segments such as dairy. With generally more cautious buyers, some markets saw a move to private treaty listings or bid sales instead of the traditional public land auction.
“The lower supply of land for sale had much to do with land prices being mostly steady as did having adequate demand for quality cropland. Lower quality farmland had less demand and in many cases was harder to sell. Investor interest in cropland increased somewhat in 2019 with several new entities entering the market and also from an increase in purchasing activity by existing institutional investors,” said Dickhut.
Several other factors had a favorable effect on farmland values in 2019. Interest rates remained historically low and moved even lower during the year when at one time, most thought rates would work higher. The other significant factor supporting land values and buyer demand, especially by farmers, was the amount of government support for production agriculture. One third of agriculture’s 2019 net farm income came from government provided sources including crop insurance, the Market Facilitation Program, and various other conservation and program funding.
In 2019, the ag industry endured floods, planting frustrations, trade uncertainty and struggling commodity prices. Financial conditions for some producers degenerated, but agriculture overall remains in better shape than expected due to support payments and the fact that land values remain historically strong. The land market weathered many storms in 2019 just like U.S. agriculture as both balanced precipitously on the plateau of the past five years.
So will 2020 be the year that the land market breaks out of its plateau?
“There are a number of factors that indicate that the land market will continue to be steady in 2020,” said Dickhut. “Interest rates are low and are poised to remain so during the foreseeable future and government support through MFP payments will likely continue if Chinese trade issues are not fully resolved. Overall, agriculture is in adequate financial shape, but there are individual and regional concerns.”
There are also factors that could have a more depressing influence on farmland values in 2020, Farmers National reported. In addition to on-going trade disruptions, there is the concern if there will be an increase in financially caused sales of land by producers. Buyer demand for good cropland has been adequate for the supply and this would have to remain so in order for land values to continue on their plateau.