March 18, 2019 

The decline in land values since 2013 has been gradual and reasonable given the lower commodity prices and farm incomes. Over the past two years, land values stabilized and even bumped up a bit in several states. Real net farm income has fallen to levels only seen six years since 1990 with three of those six being during the most recent four years (Ag Economists 3/11/19). As we have discussed before, the low supply of good farmland for sale has helped support land prices in most areas. With a farm only coming up for sale once in three or four generations, there has been adequate demand to buy the good farms. Lower quality farm prices have softened more over this period due to being less efficient to farm. So what is happening now in land values as the winter auction season winds down?

At Farmers National Company, recent auction results tell a mixed story in land prices. In Kansas for one, several auctions brought strong prices corresponding to what the land would have sold for two years ago. In other states, sales prices have ended up where expected or a little softer. With lower quality farmland, auction prices can be stable to lower than expected depending on the area. Local differences in how aggressive the buyers are, recent crop yields, and amount of land on the market are important influences on bidding activity and final sale prices more so than any overall trend.

The one wild card affecting land values that has been talked about for several years now is the question of how many additional land sales will there be due to financial stress among farmers? Till now, we have not seen that many stressed sales in the open market. Many of these sales happen quietly behind the scenes between a farmer seller and an investor buyer before the lender forces a sale of assets in the marketplace. But as the re-financing season wraps up before planting the 2019 crop, most expect to see a few more land sales over the coming months from financially stressed operations. The question becomes how many more sales in an area will it take to put downward pressure on land prices? At this time, buying interest in most areas has been adequate enough to purchase the good land that comes up for sale.

Putting all the what ifs together, including trade issues, weather, global commodity demand, and interest rate direction, along with the expectation for continued farm financial stress, it becomes reasonable to expect land values to take another small tick downward as buyers continue to be cautious in making purchase decisions. On the other hand, if several of the uncertainties are resolved favorably and the supply of good farmland for sale remains low, there will be support for current land prices. Time will tell us the answers as we move through 2019. 

Randy Dickhut 

Senior Vice President - Real Estate Operations 

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