Farmland sales continue to smash records. The latest is a record land sale that cashed in at $30,000 per acre. So, is it a trend or a one-time phenomenon?
The record-breaking sale for November made its rounds on social media. In Sioux County, Iowa, 73 acres sold for $30,000 per acre, with a total price of more than $2.1 million. A local farmer purchased the land, so now a major question remains. Where does this unbelievable land market end?
“That's a really good question, because I wouldn't have bet we'd ever see a $30,000 sale this year, either,” says Brent Gloy of Agriculture Economic Insights.
How High Can Land Prices Go?
Gloy thinks the jetliner has hit, and farmland values will be at a cruising altitude for now due to a number of reasons. He believes higher interest rates could start having an impact on this land market.
Land Values Will Be Commodity Price Dependent
FBN Chief Economist Kevin McNew thinks the fuel for farmland values could continue as the supply and demand situation points to strong commodity prices again in 2023.
“We think farmland values probably continue to stay high, as long as commodity markets stay high, which I think they will for the next year or so,” McNew says. “We're in a much different paradigm than probably what I’ve seen in all my years in agriculture, where we have really, really constrained supplies and demand growth that is really through the roof, and I think that's a catalyst for farmers for the next year or so, for sure."
High-Quality Farmland Still in High Demand
While Gloy foresees the rise in land values slowing, one-off record sales could continue, and high-quality farmland will continue to be in high demand.
“There's a lot of money in the farm sector,” Gloy points out. “And for people that see that farm that they really want, they've got money to pay that. And so those values will stay pretty strong, for the really high-quality properties that are well located.”
Where he could see land values softening is in the more marginal land, but he warns commodity prices today are only fueling the land market.
“Put $7 corn into your budget, and for the next 10 years, you can support pretty high farmland prices,” Gloy says. “The question, though, is whether we think that is kind of where things settle out.
EDITOR’S TAKE:
Did we say farmers/ranchers are a great target market? With farmland values like those reported in this article, is there any question that balance sheets are rock solid and can support a great deal of debt if necessary. We are also scratching our heads in disbelief at how rapidly land prices have escalated. It was less than a year ago when a land sale in Iowa broke the record at $25,000 per acre. It seems no one can predict where it will level off. But in the meantime, suffice it to say farmers/ranchers will be your best customer prospects. Surveys reveal that trucks are the number one item on their shopping list this year. That is precisely why you should consider holding a farmer appreciation day at your dealership. Offer them ride and drive opportunities. Open up your parts and service departments with great fall/winter specials. And, of course, put up your AgPack® signage.
