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%.
Public land auctions in Iowa
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.
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.