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Selective buyers vie for high quality farmland

Thu, Jun 27th, 2013
Posted in All Agriculture

OMAHA, Neb. - An accelerated farmland sell-off at the end of 2012 has led to continued low supplies of premium quality property, according to Farmers National Company, the largest farmland and ranchland real estate company in the country. Last year’s rush, prompted by economic uncertainty and tax law changes, continues to have an impact into 2013. High quality land is still in demand, and buyers are competing for top acres that are currently in short supply.

Competition for land has kept values strong, averaging 20 percent higher values over comparable land in 2012. Much of the continued rise is due to auction activity driving sales prices as purchasers vie for parcels of land. Mid- to high-quality properties are still seeing such rises in value, while lower quality land values are staying steady.

Values are still going up, but the pace has slowed overall, said Derrick Volchoff, ALC, vice president of real estate operations at Farmers National Company.

Auctions today have turned very competitive with bidding wars becoming the norm for high quality land sales. Areas of the country that normally do not run auctions, such as the Delta region, are now seeing them on a regular basis, according to Volchoff.

Despite an overall moderation in the number of sales transactions since the end of last year, there has been noticeable growth in the size of parcels being sold per purchase, said Volchoff.

Moving into the third quarter of 2013, Farmers National Company expects the number of transactions being closed to increase, based on activity seen in the past 60 days.

During the first two quarters of 2013, there has been a hiccup in activity based on the surge at 2012 year-end, said Volchoff. However, the trend seems to be shifting upward again and transaction numbers for the balance of the year should remain relatively steady.

Investors are sticking with land as a safe, long-term investment while farmers are putting cash from past yearly profits back into operations. Built up cash reserves for farmers are prompting farm operators to buy premium land when it becomes available to add to their inventory and to accommodate the return of younger family members to farms. For both groups, economic uncertainty is still driving purchase decisions. Farmers are looking for premium land on which to expand, while investors may purchase properties based on price and projected return on investments.

Even with recent drops in crop size for farmers, profits are still at a level higher than in 2010, said Volchoff. Farm debt is still low in relative historical terms.

According to Volchoff, several issues in the U.S., such as healthcare and interest rates are likely to impact economic trends and thus land inventory levels and sales activity once they are resolved. The direction of market and political issues will likely shape the rest of 2013. As the housing market improves, developers will likely begin to buy land for development. This could trigger more 1031 tax deferred exchanges pushing new money into the market.

Farmers National Company, an employee-owned company, is the nation’s leading agricultural real estate and farm and ranch management company. The company has sold over 3,500 farms and more than $2.0 billion of real estate during the last five years. Farmers National Company currently manages more than 4,700 farms in 24 states. Additional services provided by the company include auctions, appraisals, insurance, consultation services, oil and gas management, lake management and a national hunting lease program. For more information on land listings in your region, visit the Farmers National Company website at www.FarmersNational.com.

Land Value Reports

Iowa and Minnesota

Demand for high quality farmland continues to be very strong in the North Central Region including Iowa, Missouri, Minnesota and South Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. While demand from both investors and farmer operators is high, farmers are the ones paying top prices and targeting premium pieces of land.

Auction numbers in this region continue to be strong, prompting sellers to net top sales prices, according to Kain.

Continued low supplies of land in this area have kept the market strong, said Kain. Low interest rates have also helped drive the market. Without low rates, current commodity prices do not justify current land values. Any jump in rates could lead to a sales slowdown, but its strength as an investment is keeping activity healthy.

In Iowa, top quality land is selling at more than $12,500 per acre, Minnesota values are reaching $9,500 per acre, and values in eastern South Dakota have reached $8,000 plus in many areas.

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