LOOKING AHEAD: Good yields overall are supporting a land market that otherwise faces some headwinds heading into 2019.
Despite variable growing conditions, strong yield expectations were met (or exceeded) in most regions of Iowa. Strong overall yield results will be supportive to a land market that otherwise faces some headwinds, including higher interest rates, relatively weak commodity prices and significant trade uncertainties.
Localized differences in yield results are playing a slightly larger role in farmland sale results this fall and early winter. Early-season sales already reflect this uneven trend. In areas where another big crop was produced, there is more strength and overall stability in the land market, even in the face of lower grain prices.
Essentially, these big production areas are “out-busheling” the weakness in crop prices, per se. However, in local areas where crop yields were average or below, there is more noticeable softness in the land market.
Regardless of the area, high-quality farms with the most productive soils, solid drainage, easy farmability and strong fertility continue to sell best. And in spite of some negative factors in the land market, farmers continue to pursue acquisition opportunities when they make sense to the core operation of their business.
Understanding today’s market
Pay special attention to current issues affecting land prices. First, learn whether the area you are interested in had strong or weak crop production in 2018. Production success or disappointment from area to area has set the mood in the countryside in the current sales season.
Second, keep an eye on increasing interest rates, as higher rates will continue to pressure farmland values. The Federal Reserve is expected to again raise short-term rates at their December meeting, which follows a consistent pattern of bumping up short-term rates since late 2016.
While short-term rates don’t directly impact long-term borrowing costs, short-term rates quite directly impact farm operating notes, which are now squarely in focus as we are in operating loan renewal season. And since early fall, long-term rates have appreciably increased for the first time in many years.
Third, disruption in the commodity markets by the enactment of global trade tariffs is real and has softened U.S. grain markets. How global trade negotiations play out in the weeks and months ahead will continue to impact commodity prices, market confidence and, ultimately, underlying asset values, including farmland.
Crop insurance, new farm bill
As we approach the 2019 growing season there will be a reset in crop insurance price levels for 2019. If things don’t change in the grain markets, these revenue policy price levels will reset to significantly lower levels for 2019 production and will add more pressure to an already stressed market.
Finally, negotiations continue on the new farm bill in the current lame-duck Congress. Any new farm bill policies will likely impact the countryside for the next several years. Stay tuned for further analysis as new information surfaces on all these topics.
NORTHWEST
O’Brien County: Southeast of Granville, 72 acres recently sold at public auction for $14,000 per acre. The farm consists of 67 tillable acres with a 94.5 CSR2 and equals $159 per CSR2 point on the tillable acres.
NORTH CENTRAL
Hanco*ck County: Southeast of Corwith, 59 acres sold at public auction for $9,100 per acre. This farm has 58 tillable acres, a 78.9 CSR2, and equals $117 per CSR2 point on the tillable acres.
NORTHEAST
Allamakee County: South of Lansing, 154 acres sold for $10,000 per acre. It has 150 tillable acres with a 64.1 CSR2, so the sale brought $160 per CSR2 point on the tillable acres.
WEST CENTRAL
Calhoun County: Northeast of Yetter, 40 acres sold at public auction for $10,500 per acre. There are 39 tillable acres with an 87.2 CSR2. The sale equals $124 per CSR2 point on the tillable acres.
CENTRAL
Marshall County: Southwest of Clemons, 130 acres sold at public auction for $9,100 per acre. With 126 tillable acres and an 81.7 CSR2, the sale equals $115 per CSR2 point on tillable acres.
EAST CENTRAL
Cedar County: Northeast of West Liberty, 154 acres sold for $8,409 per acre. The farm has 140 tillable acres with an 82.4 CSR2. Remaining acres are CRP and waterways. The sale equals $112 per CSR2 point on the tillable cropland acres.
SOUTHWEST
Fremont County: Southeast of Percival, 193 acres sold at public auction for $4,300 per acre. The farm has 191 tillable acres with a 67.7 CSR2. The sale equals $64 per CSR2 point on the tillable acres.
SOUTH CENTRAL
Wayne County: West of Cambria, 344 acres sold at public auction for $4,700 per acre. The farm has 314 tillable acres with a 57.1 CSR2. Remaining acres are in terraces, roads and non-cropland. This sale equals $90 per CSR2 point on the tillable acres.
SOUTHEAST
Louisa County: South of Columbus Junction, 101 acres sold at public auction for $4,350 per acre. There are 76 tillable acres with a 76.5 CSR2, of which 18.5 acres are in CRP, with the balance of the farm in roads and non-cropland. The sale equals $75 per CSR2 point on the tillable acres.
Hertz Real Estate Services compiled this list, but not all sales were handled by Hertz. Call Hertz at 515-382-1500 or visit hertz.ag.
