June 29, 2020
Across agriculture and the ag press, we keep getting the question "What's going to happen to land prices?" As producers, lenders, and policy makers calculate the losses from Covid-19 shutdowns, supply chain disruptions, trade tensions, and lost demand in many ag sectors, everyone is concerned about the affect of these factors on land values, the bedrock of agriculture's overall financial health. But it will be a few more months till the land market can factor in the push and pull of competing influences that will determine land prices.
The agricultural land market is just coming out of what is normally the slower sales time of the year as producers and landowners move through the start of a new season and lease year. Overall, the amount of farmland for sale during the past several months was less than usual due to the Covid-19 effect. With that said, Farmers National Company experienced sales activity equal to or better than the past three years during the same time period. The lower supply of land for sale and low interest rates have helped support land prices in many areas through this time of depressed commodity prices.
Federal spending for agriculture has been an extremely important support for overall net farm income the past two years and is expected to grow to over one-third of farm income in 2020. The Covid-19 loss payments are being more widely distributed this time around as livestock, dairy, produce, grain, and other ag producers will receive much needed support. Whether there will be additional funding for distributions is one question that won't be decided for several more months. Add this future impact to the questions of how the 2020 growing season will turn out and how soon and to what level demand will come back for ag commodities and you can see why it will be several more months before we know the direction of commodity prices.
At this time, buyer demand for good cropland is present and growing somewhat from first time and returning investors. Interest rates are low and there is not a big increase in land for sale which both help support land prices for now. The land market will also be taking into account the negative factors to see how they play out in the months to come. In addition, we will know more about the financial condition of ag producers later in the year as revenues and expenses for 2020 will be tallied. In a few months, we will know much more about most of the factors affecting agriculture and the land market.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|