An agricultural real estate expert says there has not been a drop in most farmland values. Colton Lacina with Farmers National Company says that despite the sluggish farm economy for crop producers, ag land values have been steady. “Depends on locale. Depends on quality. High quality land has definitely held higher value than marginal land. We have seen, in pockets, some slight reductions in what we consider more marginal tillable land, but overall the market has held together well.”
Lacina says there has been an uptick in local non-farmer investors and institutional farmland buying. He says there are also several cases where farmers own or will buy land that’s not close to the home farm simply to use in future land swaps without huge tax penalties. “We actually see those quite a bit where a producer will have an opportunity to purchase a piece that’s much closer to home and then turn around and liquidate something that’s 15, 20, or 30 miles away and turn around and do a 1031 exchange into that property that’s closer to home.”
Lacina says the IRS 1031 form allows people to swap properties without tax penalties. “You can sell a farm that you bought ten years ago. You can take the proceeds from that farm, turn around, reinvest all those funds back into another like kind asset, another farm, and not have to pay the capital gains tax that you gained from owning that farm over the years.”
Lacina says now is the traditional busy season for selling agricultural land because it’s when most annual leases are up for renewal. There are also investors willing to work with producers who want to add farmland to their operation.
EDITOR’S TAKE:
One thing most farmers/ranchers love to accumulate is more land. And as Mr. Lacina points out, high quality land, close to current operations, often will bring a premium at auction. Long-term prospects for farmland values are positive. Although farmland can, and sometimes does retreat, it is often followed by a very positive uptick. Plus, let’s face it, when the ag economy is running on all cylinders again, expect farmland values to also escalate strongly. Putting farmland on a farmer/rancher balance sheet is like money in the bank!
Farmers/ranchers who own land and have seen their net worth increase over time are very solid credit risks. You can also help them with their cash flow by using CADFI. It is the finance option that allows you to fashion their payments to align with their income flow. For instance, if they sell crops once a year with income all at one time – no problem. You get the picture. If you’re not currently familiar with or using CADFI, give us a call or go to our website www.certifiedagdealer.com to learn more about this great financing option!
