Demand for farmland drives up prices
Interest in buying farmland has grown since a downturn induced by a coronavirus pandemic blanketed the land market last spring. Farmers feel more financially secure as high commodity prices have arrived on top of large government payments in 2020. This is causing farmers to bid more aggressively for additional land than in the past six years.
“Selling prices for farmland have risen 5 to 15 percent in the past six months, with most of the increase occurring since the first of the year,” said Randy Dickhut, senior vice president real estate transactions at Farmers National Company, in a released press release. by the company. “Competitive tendering among interested buyers is really putting pressure on land prices right now.”
Individual investors, both first-time and experienced buyers, are entering the land market in search of a safe, long-term real estate investment in a low interest rate environment. Investing buyers rarely outbid farmer-buyers for a good farm unless they have 1,031 tax-deferred swap funds to spend in a short period of time.
The increase in the price of agricultural land occurs in most areas of the grain belt and with most types of land.
“At the Farmers National Company auction, we see competitive bidding pushing the prices of good farmland to levels close to 2014 values,” Dickhut said. “Mid-to-lower quality farms also experience higher selling prices, while pasture increases are more modest.”
Currently, the demand for good agricultural land exceeds the supply of farms for sale. In recent years, the number of farms for sale has been lower, but the market demand for agricultural land has remained sufficient to balance the lower supply, resulting in stable land prices. One of the main factors pushing prices up is the high demand for owning farmland.
Higher land values will bring more sellers into the market, as estates, trusts, recent heirs, and family groups decide to sell the farm or ranch and capture the higher prices. In addition, the uncertainty surrounding future tax policies will trigger a sale sooner rather than later for some.
Landowners who are considering selling their farm are now considering both the higher proceeds they would get from the sale and the potential tax obligations that might be owed.
The land market will balance the increased demand for good cropland against what could be an increasing supply of farms for sale.
“Our agents are receiving an increasing number of calls from property owners who wish to sell for the above reasons. Our sales activity pipeline for the summer and fall is filling up. Dickhut said.
Farmers National Company’s land sales activity has been dynamic. The volume of land sold in dollars is up 60% from last year and 67% from the average of the past three years. The number of acres sold during this period is up 64% from last year.
In a booming land market, it becomes more difficult to predict what a farm will actually sell for on any given day, especially when there is demand from both farmers and investors, Dickhut said.
“The best way to sell cropland in today’s market is to sell it at auction or in some form of competitive bidding that brings potential buyers together and allows them to push the price,” he said. .