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Two Overriding Questions in the Land Market
You are here:   Blog  »  Agricultural Real Estate  »  Two Overriding Questions in the Land Market

December 3, 2018 

 

Currently, there are two important questions hovering over the land market. One is whether there will continue to be enough buyers in the marketplace to absorb or buy the land that comes up for sale? The other is will we see enough land come onto the market for sale that it starts to overwhelm the number of active buyers? As we know, the amount of farmland sold on the open market the past five years was less than the years leading up to the 2013 land price peak. Land prices declined in these five years, but have been fairly steady more recently for good quality farmland. The lower supply of land for sale balanced in equilibrium with fewer buyers to keep land prices stronger than one would have thought given lower net farm incomes.

The question is will there be enough buyers going forward? Beings farmers typically buy 70-80% of the farmland that comes up for sale, the financial stress of the current downturn in agriculture has and will cause some farmers to back off land purchases. But overall, there is still a lot of individual producers who have the capital to buy land. Also, local and institution investors are in the market to buy if the price is right for them. As people look for long-term, safe investments, interest in owning farmland is again on the rise.

The other part of the land market equation is the amount of land for sale. Right now, we are seeing a small increase in the amount of land for sale.  In fact, Farmers National Company has 21% more for sale at the present time compared to last year. The predominant sellers continue to be inheritors or investors who are deciding for various reasons that now is the time to sell.  At this time, we have not seen a large increase in financially caused sales of land by farmers. The market's thinking is that we may see more of these type of sales over the winter and into 2019. Some of these sales happen outside of the open market, but still seek available buyers who may not then purchase in the open market.

As we see these two questions or sides of the land market play out into next year, one result is that there is more caution among buyers. The other is that sellers are having to be realistic in their expected selling price. Stay tuned over the coming months as farmers work with their lenders to renew operating loans, producers watch commodity markets for signs of better grain prices, and world economic issues play out.  
 

   

Randy Dickhut 

Senior Vice President - Real Estate Operations  

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