Jay VanGorden, who handles sales for Indiana, Ohio, Michigan and Kentucky for Farmers National, said productive, mostly arable land is still selling at prices near recent records.
“Less productive farms with smaller areas under cultivation have seen values fall by 5 to 10 percent, but this is much smaller than the 25 to 30 percent fall in grain prices over the past 18 months,” Van Gorden said.
Shadegg noted the role that long-term price increases have played in the historical value of farmland. Over the past 25 years, land values have risen in stages with the ups and downs of the agricultural economy. Values have risen and then plateaued along with grain prices and farm profitability. Each plateau has established a new standard of value that has been sustained through production, demand, and profitability.
“An important factor in maintaining land price levels is investor interest in the market,” he said. “While these bidders are not necessarily successful buyers of land, they are certainly involved in setting a price floor by bidding up to investment benchmark levels. Buyers in this segment also consider the long-term appreciation experienced over the past 25 years, the potential for future appreciation, and the value of land as a diversified asset.”
In Van Gorden's area, development plays a big role in supporting the market.
“While farmers remain the primary buyers of farmland, prices in the eastern region will also be driven by investor interest and 1031 tax-deferred exchange purchasers around larger cities in the eastern region. Prices may also increase in some rural counties, especially as sellers of development properties look for alternative locations,” Van Gorden said.
Buyers looking to buy land in the second half of 2024 are factoring rising interest rates and declining profit potential into their decision-making. Schadek said he expects land values to change depending on location trends.
“Areas with a strong supply and demand scenario, the expansion of alternative land use projects and irrigation water concerns could see significant appreciation or depreciation in values,” Schadegg said. “There remains strong demand for land as an investment from outside investors and agricultural producers. Investors are looking for assets that generate annual income, and agricultural producers may be looking for expansion opportunities.”
Demand for quality farmland remains high for both types of buyers, but the future direction of farmland prices will depend largely on the financial situation of farm operators, who make up the largest group of farmland buyers. Limited profitable conditions will discourage purchasing. If farmers withdraw from the market as buyers, it will be a sign that the market is heading in a downward direction.
Farmers National said business remains strong so far, with listings and closings at levels consistent with 2023 and above the company's five-year average. While activity and interest is picking up ahead of the fall season, Shadegg noted many of the upcoming sales will revert to standard listings as sellers reserve the option to negotiate price.
For a roundup of regional insights, please visit: https://www.pappasmarketing.com/….
Katie Dehlinger can be reached at katie.dehlinger@dtn.com
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