Investors are starting to return to agricultural land as a home for their investment dollars, says Lee Vermeer, vice president of real estate operations at Farmers National Company (FNC), the nation's leading agricultural real estate and farm and ranch management company.
"Investors stepped aside around November, but they have gotten back in the game," Vermeer says. "Everyone was trying to figure out the stock market and whether the economy had bottomed out. Some believe it has. Now that the uncertainty has subsided, buyers are looking for investments they can feel good about."
In a release, FNC (www.farmers-national.com) says that during the past six months, owner/operators around the country took advantage of the decline in investor attention and purchased available land to expand their operations. That activity has kept land values steady despite the turbulent economy.
"A good indication of the strength of the land market was that even with all the uncertainty and the stress on the market the past six months, land values held," Vermeer says. "I think that speaks to the quality of the land, but also shows the confidence today's buyers have in the land market as an investment opportunity."
Vermeer says the land market did slow somewhat last fall and there were some weak spots around the country the first part of 2009. He attributed the slowdown to the drop in commodity prices. In the past 30-45 days, however, the market is gaining ground.
FNC, he adds, is seeing strong buyer interest, with some land sales at the same price levels recorded in mid 2008.
Here are some reports from various regions provided by FNC area sales managers:
- Kansas, eastern Nebraska, western Iowa. Monty Meusch, FNC area sales manager in Kansas, eastern Nebraska and western Iowa, says he doesn't believe the talk about the sagging land market in the Midwest. He says the land market is still booming in most areas and demand for the “really good farms” is as strong as last summer, with the better farms in western Iowa and the eastern half of Nebraska selling in the $4,500 to $6,000/acre range in recent weeks.
In northern and central Kansas, the better productive farms are trading in the range of $1,500 to $3,000/acre for creek bottom or center pivot-irrigated farms. The demand for pasture also remains strong, though a dip in grassland sales is likely the result of a tough cattle market and lower herd counts.
"For the most part, the market is still being fueled by active farmers and ranchers seeking to add land to their operations," Meusch says. "However, with most other investment options being on the downside we are seeing renewed interest from investors who believe farmland may be their best investment for the long term."
Meanwhile, in western Nebraska, north central Kansas and South Dakota, J.D. Maxson, FNC area sales manager, says auction activity in recent months has resulted in strong sales for local owner/operators. Recent auctions in western Nebraska have seen sales range from $385/acre for ranchland to $925 for dryland and pasture. And land values in south central and western South Dakota have remained strong due to the renewed interest investors are showing in purchasing land.
- Iowa and Minnesota. In Iowa and Minnesota, Sam Kain, FNC area sales manager, reports higher quality Iowa farmland is holding its own, but medium to lower quality farms have gone down in value.
"We’ve had a few high quality farms top the $7,000/acre mark," Kain says, with the medium to lower quality land retreating in some cases as much as 15%.
In Minnesota, higher quality land is in the $4,000-$5,000/acre range, with mid-quality land bringing around $3,000.
- Illinois, Indiana and Ohio. In Illinois, Indiana and Ohio, land sales have rebounded with quality ground being purchased by existing land owners in those regions, says Roger Hayworth, area sales manager.
"We saw the slowdown because landholders were hesitant to sell. If they did sell, they weren't sure what they should do with the money they gained."
Grade A soil types in mid to north central Illinois are selling for $6,500-$7,000/acre, Hayworth says. In central Illinois, it’s $5,000 to $6,200, while southern Illinois is in the $4,000-$5,000 range.
Indiana is farther back, with Type A soils bringing $4,500 to $6,000. In northwest Ohio, land is in the $5,500 range, with west central Ohio at $4,000-$5,000/acre.
Hayworth says some of the investor interest in recent months is coming from buyers outside of the U.S.
"Investors did pull out in the fall, but now they are getting back in the game. They want to get back in to the land-buying business in an effort to hedge inflation. Current landowners view their properties as safe havens and will not be selling unless they have to. I think this could result in it being a real seller's market. I can see this becoming a cat and mouse game between sellers and buyers."
- Arkansas, Mississippi and Tennessee. The Mid-South region is one area experiencing a slowdown in land sales, with prices down 10% from last summer's high marks, says Bill Shannon, FNC area sales manager.
Shannon says irrigated land in Arkansas is at $2,500-$3,000/acre, with dryland values in the state at $2,000 to $2,500. But dryland acres in Tennessee are selling for $3,500-$4,000/acre, compared to Mississippi's irrigated land, which is topping out at $2,800. Those looking to purchase dryland acres in Mississippi can expect to pay $1,800 to $2,400/acre.