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Recapping the 2019 Land Market

December 9, 2019 

The land market in 2019 continued the plateau trend of the past several years in which the supply of ag land on the market remained lower than average and prices for good quality cropland held fairly steady. Farmland sale activity in the first part of the year was slower than it had been for some time with late spring and early summer especially void of farms for sale. The historically delayed and prevented planting season had much to do with the lower activity during that time.    

  

Land values in 2019 once again bucked the prevailing depressed mood in agriculture to hold steady or even increase slightly in some instances except for the most stressed areas or segment such as dairy. Demand for productive and efficiently farmed cropland from farmers stayed consistent in most regions of the grain belt despite the economic challenges faced by US agriculture. Some regions, such as the Pacific Northwest experienced slowing demand exhibited by longer listing periods and flat prices. With generally more cautious buyers, some markets saw a move to more private treaty listings or bid sales instead of the traditional public land auction.     

  

The lower supply of land for sale had quite a bit to do with land prices being mostly steady as did having adequate demand for quality cropland. Lower quality farmland had less demand and in many cases was harder to sell. Ranch land and timber producing tracts in Texas continued to see good demand for what came up for sale. Investor interest in cropland increased somewhat in 2019 with several new entities entering the market and also from an increase in purchasing activity by existing institutional investors.    

  

Several other factors had a favorable effect on farmland values in 2019. Interest rates remained historically low and moved lower during the year when at one time, most thought rates might turn higher during the past twelve months. The other very important factor supporting land values and buyer demand, especially by farmers, was the amount of government support for production agriculture. Nearly one-third of agriculture's 2019 net farm income will come from government supported payments including crop insurance payments, Market Facilitation Program payments, and the various other conservation and program funding. This cash flow infusion, especially the MFP payments, has been critical for producers to help them balance financial performance in 2019. 

  

In 2019, agriculture endured floods, planting frustrations, trade uncertainty, and continued lackluster commodity prices. For those who harvested a crop, most were pleasantly surprised that yields were better than expected approaching longer term averages. Some regions experienced good crops while others had little or could not harvest all of what was grown. Financial conditions for some producers degenerated, but agriculture overall remains in better shape than expected due to support payments and the fact that land values remain historically strong. In the end, the land market weathered many storms in 2019 just like US agriculture, but both continued on the plateau of the past five years. 

Randy Dickhut  

Senior Vice President - Real Estate Operations 

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