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March 16, 2020
One of the underlying supports of the stability in land values over the past several years has been the lower supply of good cropland for sale. Demand was adequate in most areas to have buyers for what came up for sale. Therefore, land prices stayed stronger than expected despite the depressed farm economics. But, the global economy is entering a unique time and questions will arise about how land values might react to the events happening across the globe. Even though Farmers National Company's real estate sales volume this winter is up 19% over last year, what will land sales activity be in the coming months?
The majority of sales of farmland are from trusts, estates, recent inheritors, or family groups that have owned the land for several years. These owners make the choice to keep or sell the farm based on many factors including financial and emotional. Will the current events of Coronavirus, lower oil prices, declining stock prices, and a slowing world economy have an affect on the land market and values?
Research and observations typically show that land values respond opposite of the stock market. Alternative investments now have very low interest rates or high risk, so the returns from farmland are currently more attractive. The question for those who are thinking of selling farmland at this time comes down to where will I invest the proceeds at a better return with less risk than the farm? But, there will be those who have to sell anyway to divide an estate or who just want to generate the cash for other purposes.
Time will tell over the next months whether those who might want to sell their farmland will hold off due to the uncertainties in financial markets and the value of the farm asset during times like this. Or will there be an increase in farms being sold because of financial needs or other reasons? Stay tuned to see what happens in the land market!
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|