Five-Year Decline in Farmland Sales Volume

farmland
( Farm Journal )

The number of farms sold in 2017 declined for the fifth year in a row, according to data from Farm Credit Services of America (FCSAmerica) and Frontier Farm Credit. The lenders report the number of sales in their service area declined by about 270, or 7.5%, compared to 2016. FCSAmerica serves Iowa, Nebraska, South Dakota and Wyoming. Frontier Farm Credit serves eastern Kansas.

The data, generated by the lenders’ appraisal teams, confirms recent surveys pointing to a continuing downturn in the number of farm properties on the market. 

At 3,334 completed sales, 2017’s sales volume is the lowest since at least 2009—the extent of our historical data. This year’s total is down  nearly 2,600 from the peak of 5,925 sales in 2012—a decline of 44%.

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increased 2% from 2016, while activity in the other areas served decreased an average of 22% from a year ago, the lenders report.

The number of “no sales” rose to 137 in 2017—a rather small increase from the 131 “no sales” reported the previous year. This year’s total of “no sales” is the second lowest since 2012 when 130 were recorded; 2016’s 131 “no sales” is the lowest.

 

The data, generated by the lenders’ appraisal teams, confirms recent surveys pointing to a continuing downturn in the number of farm properties on the market.

The data, generated by the lenders’ appraisal teams, confirms recent surveys pointing to a continuing downturn in the number of farm properties on the market.

© Farm Credit Service of America; Frontier Farm Credit

While we don’t have similar data for other regions of the Midwest, anecdotal information from surveys and real estate brokers point to fewer properties being offered for sale.

That certainly makes sense. When prices begin to edge lower, landowners who might be contemplating a sale frequently decide to wait, hoping for a rebound in prices. Only those properties that absolutely must be sold, usually for estate settlement purposes, move to the market.

The lack of supply has been key in supporting values during this correction in prices. And it is what makes this correction different from the plunge in farmland values seen in the 1980s. That price dive was due to a collapse in farm balance sheets. Incomes were cut sharply and asset values, primarily farmland, also plunged. That combination forced the sale of farm properties onto a market of unwilling buyers.

Forced sales have been largely absent, so far. And the quality farms that have come to the market have been relatively well received. Poor-quality farms have seen their share of weak demand, frequently requiring a price discount and a long marketing period. The result has been a relatively manageable decline in farmland values.

Whether or not this continues remains the obvious question. We are aware some properties might soon come to the market due to eroding working capital. Many of these might be offered as “sale and leaseback.”

While such offerings could require a long marketing period, they avoid “dumping” farmland on a market that is short of buyers. That can help support prices even as supplies rise. In addition, such “slightly” distressed farm sales will likely be regionalized. That would tend to prevent any weakness prompted by a small boost in supply to become a depressing factor on prices across the broader Midwestern and Plains markets.  

 

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Submitted by Greg on Wed, 04/11/2018 - 01:19

Rod Swoboda 1 | Apr 27, 2017

Farmers National Co. says its real estate sales volume of ranches and farms is up 21% during the first half of the current fiscal year, and up 38% compared to two years earlier. That rise prompted the firm to take a closer look at what is happening.

Farmers National’s fiscal year begins Oct. 1, so the 21% increase is for October 2016 through March 2017, compared to a year earlier. The 38% increase is compared to October 2014 through March 2015.

Operating in 28 states, the company has seen an increase in both number of individual sales transactions and in acres sold. Acres sold increased 10% from the previous year and 27% compared to two years ago. For the first half of its current fiscal year, there were 470 transactions involving 63,925 acres.
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Submitted by Randy on Wed, 04/11/2018 - 01:20

Randy Dickhut, senior vice president, says sales activity is being driven primarily by non-operating landowners. “So far, few farm operators are selling land; there just isn’t much land being offered for sale. And investors continue to be in the market looking for opportunities to add acres to their holdings. The slow decline in land values is part of the reason some landowners are selling.”

These landowners have decided now is the time to sell and capture some of the land appreciation they’ve had in recent years. Dickhut says there is still good demand for land in most of the company’s 28-state service area.
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Submitted by Mike on Wed, 04/11/2018 - 01:20

“The number of buyers and sellers for good land in most areas is in equilibrium, and that’s helping our land sales. As long as the seller is realistic about today’s market price for land in the area, there are buyers looking to buy. I credit our sales increases in the face of a slowing land market to our network of agents educating their clients on the current land market prospects,” Dickhut says.
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Submitted by Gordon on Wed, 04/11/2018 - 01:22

It’s not farm operators who are selling land. “There’s a little of that; a few farmers are selling land to maybe shore up their balance sheet or for some other reason. Mostly, it’s non-operating landowners, perhaps with inherited land, who are selling it,” says Jim Farrell, president of Farmers National.

“Some of the people selling now are looking at this market as it is trending lower; land values have been on a downtrend for several years now,” notes Farrell. “They think this might be a good time to sell. Land values are still well above where they were 10 years ago, and we still have strong demand for land, especially high-quality, productive land that is well-drained. Our agents at some sales are surprised at what land is bringing in price. It’s bringing more than what the market might indicate it should, based on today’s low commodity prices and declining farm income.”
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Submitted by Phillip on Wed, 04/11/2018 - 01:42

Especially in Iowa, it’s primarily farmers who are buying land. “There are farmers who are financially well off and are looking to add some land,” says Farrell. “There are also investors buying land in Iowa. Most of the investors are people who already own a farm at a location and are adding property to what they own. They rent out the land. Overall, 80% to 85% of the sales we handle today go to local farm operators.”

What about price trends? Which direction are land values going? “Land prices generally are still headed downhill,” says Farrell. “They’re not decreasing as fast as they were, and in some cases and in some areas, they are holding steady. Where we’re seeing the biggest decline in land values is with the poorer-quality ground.”
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Submitted by Ralph on Wed, 04/11/2018 - 01:42

High-quality ground, in the upper Corn Suitability Ratings, is selling well. Farrell says, “If you go back and look at the top of the land market, say December 2012 and January 2013, and compare it to where land values are today, land prices are down no less than 15% on good cropland and in some cases 20% from those highs. However, that’s still well above where land was in 2006 and 2007. So the land price is still good, and some people are trying to take advantage of that and sell some land.”
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