Farmland Values Skyrocket, Increases Expected to Continue

Three years passed between the first time Cody Skinner talked to the potential sellers of the Grundy County farmland to the day the auction was held. It was worth the wait. Iowa Land Company, where Skinner works, sold 75.7 acres of farmland at auction August 27 for a whopping $22,600 per acre – a record high for the state of Iowa. And, it was all over in a flash.

Like all farmland auctions, there is more to the story, however. Let’s unpack some of the particulars:

• This tract – 74.75 acres of tillable land is all non-highly erodible land, a high-quality tract.
• When it comes to buying farmland, Grundy County is extremely competitive.  
• The tract is home to a wind tower. In 2022, the buyer will receive a $21,121.99 windmill easement payment from the Wellsburg Wind Farm. The payment increases 2% per year through 2044, when the final payment is $36,363.01. After 2044, a 25-year extension of the windmill lease is optional.

Never before has Iowa Land Company received so much interest in a farm. Suffice it to say, there is a lot going on with this tract, which was sold to satisfy a living trust.

Click here to see a YouTube video of the auction.

Eye-popping farmland values are grabbing headlines again. "We haven't seen these kinds of farmland auction prices since late-2013, early-2014," said Howard Halderman, President of Halderman Farm Management and Real Estate Services, based in Wabash, Indiana.

Farmers may not know their final yields yet, but they can see if they've got a good crop and their optimism is showing up in their purchases.

A Tipton County, Indiana, sale brought $14,467 per acre for 615 acres on August 30.

A survey by Illinois Society of Professional Farm Managers and Rural Appraisers shows farmland prices are going up, up, up!

Gary Schnitkey, with the University of Illinois, told Brownfield News that from January to July there was a phenomenal 20% increase in Illinois land prices. “We rarely see those large increases and if we look across the Midwest, that confirms a lot of things seen by Indiana, Iowa and federal surveys that prices on farmland are going up and it looks like they will continue to go up through the remainder of the year,” said Schnitkey. He says what really stands out to him is the consistency of increases across all farmland classes. Usually, you see some hot spots and low spots, but it is all across the board. And, it all coincides with strong commodity prices and farm income.

MARKET OUTLOOK

Farmland prices remain hot, and that doesn’t appear to be changing anytime soon, according to Skinner. After the Grundy County land sale, more potential sellers are calling Iowa Land Company to test the market. He shared that pent-up demand and strong commodity prices are fueling farmers’ appetite for more farmland; meanwhile, more investors are also interested in buying farmland.  “In the last year we’ve seen more investors becoming buyers than any time before. People are pulling money out of the stock market to invest in something tangible like farmland,” Skinner explains. “Where we used to see 80% local buyers, anymore it’s 50/50, farmers and investors.”

"The farmland market picked up even more recently," Halderman said. "We had six auctions in 10 days. Besides the Tipton County 615-acre sale and a lower quality recreational land/building site sale, four auctions brought in excess of $10,000 per acre on farms from 200 acres to 600 acres in size. That's a strong market for Indiana. Most people in the (Indiana) farmland market think really good ground can bring around $12,000 per acre. Farmland values have increased around 20% from the first of the year."

In Illinois, top farmland is now being bought for $13,000 to $17,000 per acre, depending on the neighborhood, reported Mark Mommsen with Martin, Goodrich and Waddell, a large farm real estate firm based in DeKalb.

"In Iowa, we have lots of bidders in the $13,000 to $15,000 per acre range for good farmland. But, as bids get up to $15,000 to $20,000, the air gets thinner," said Doug Hensley, President of Hertz Real Estate Services, based in Nevada, Iowa. "A year ago, that would have been unbelievable to sell farmland for $15,000 per acre."

EDITOR’S TAKE:

Farmers are not only purchasing additional land in this hot market, but the value of their existing holdings continues to rise as well. They are sitting on trillions of dollars in real estate value. Put all this together with a 20+% increase forecast for net farm income and you have a formula for truck selling success like you almost can’t imagine. Plug in some farmer optimism going into harvest, stack on some AgPack exclusive rebates and discounts that are worth thousands and you have the perfect storm for selling more trucks to your best customer prospects! Don’t hesitate, now is the time to plan your strategy for reaching this highly eligible customer. If you don’t, your competitors will!