Farmland values ​​remain stable despite fall in grain markets | AG

(KMAland) — Despite market headwinds, land values ​​continue to be high, especially in the Midwest.

Paul Schadegg, senior vice president of farm, ranch and real estate management at Farmers National Company, says the market in the “I” states continues to show strength.

“Soils of good quality and high productivity continue to produce benefits, and that’s happening in Iowa, especially Illinois and Indiana, which have become somewhat of a hotbed recently. I saw some really good sales there. We’re still approaching $20,000 per acre in these areas, we’re still seeing a lot of sales between $12,000 and $14,000 for good quality land in Iowa. The only time we see it going down is that the average land in Iowa is probably getting closer to the 9000 range now. So that’s definitely leveling off in price.”

Schadegg says farmers still make up about 75 percent of farmland buyers.

“The producer looks at it in terms of trying to build his operation at a scale that makes sense given the investment he has in equipment. There’s a certain amount of emotion involved, heritage, and it’s the producers who usually have a strong connection to the land, and that can drive their interest or motivation to buy land.”

However, investors have a different motivation.

“Investors are thinking more, ‘What’s the return on investment that’s going to give me?’ What can help me diversify my investment portfolio? But they’ve also seen in the past, if we look at the past, I mean, I can go back 40, 50 years, but especially the last 25 years, this has been a steady increase in land values. Some of these investors look back and think, “Wow, we kind of missed the boat.” We should have invested 25 years ago.” But they also see the fact that there will be no developed land. In fact, we are losing ground as we move forward.”

Schadegg says it all comes back to Economics 101: supply and demand.

“There are simply more buyers willing to buy than willing sellers. As an industry, we have seen a decline in the amount of land for sale by approximately 25% over the last couple of years and this continues to be a trend. We’re still very active as a company in real estate, but definitely not as active as we’ve seen in the last five years.”

Interestingly, Schadegg points out that land values ​​usually follow the grain market, but this has not been the case recently.

“People look a little further. They don’t react to daily news and see high demand, especially for corn, in the world, and it is predicted that we will not be able to meet much of this demand. So the current downturn in grain markets may reverse over the next few months, but the feeling now is that this could happen faster than we expected.”

Paul Schadegg is senior vice president of Farmers National Company.