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What We Are Watching In the Land Market
You are here:   Blog  »  Agricultural Real Estate

October 12, 2020 

The dust will not settle on the 2020 grain harvest for a few more weeks, but it is already time to start thinking about next year. With the dry late season and fall weather, crop harvest will be done sooner than normal in many areas allowing farmers and the industry to quickly turn their thoughts to next year. Farmers have made and will continue to make 2021 cropping and input plans in the weeks ahead. Likewise, as harvest winds down, the ag land market heats up and also looks ahead to 2021. 

  

The land market is watching to see if the events and factors in 2020 will carry over into 2021 and affect land prices. Ag land prices in 2020 seem to be on track to end up steady to stronger in many areas. Will the underlying factors supporting land values continue into 2021 or should the market be watching other potential factors in the months ahead? 

  

Net farm income is currently projected to be up significantly in 2020 due to government support payments in this election and Covid-19 year. Will there be additional federal support for farmers and landowners in 2021? Or will commodity prices for grains and livestock be up enough to negate the need for ad hoc payments? For specific areas, what will buying demand for cropland be like in regions hit by the derecho wind or a worsening drought? Besides farmer and rancher buyers, will individual investors step in to support or propel demand for ag land? Also, will institutional investors continue or increase purchases in 2021? 

  

The supply of land for sale is another factor to watch in the 2021 land market. The lower supply of good cropland for sale has supported land values the past few years. There have been fewer than expected financially sales by farmers and ranchers despite the lower income years. Will rising grain prices and the government support payments in 2020 keep stressed sales to a minimum in the coming year? Some current sellers of land wanted to complete the transaction in 2020 as they had concerns about future tax policy. Will there be a slowdown in land for sale in early 2021 because some sellers accelerated their timing into 2020 instead of 2021? Will the non-operating families, estates, and trusts who are the predominant sellers of ag land decide they may keep the land due to uncertainty of alternative investments instead of selling or will there continue to be the normal flow of sales from this group? 

  

These are just some of the factors the land market is watching as it looks to 2021. Ag land is a long-term investment for producers and investors. Short-term factors affecting the market may or may not have as much effect on today's land market as one would think because of the low interest rate environment we currently are in and the longer investment time frame of land. But, it will be extremely interesting to watch the land market as we close out 2020 and move into 2021. 

 

Randy Dickhut  

Senior Vice President - Real Estate Operations 

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