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Surveys show softening land prices

Some price surveys indicate softening farmland values. Hertz Farm Management says the inconsistency is because of local factors playing an outsized role in the land market, such as whether the area grew a big 2018 crop.

The Iowa REALTORS Land Institute says statewide cropland values were down more than 1.7 percent from March to September 2018. It’s the first decrease in that survey since 2016, offsetting the 2.9 percent increase from September 2017 through March 2018. It’s because of low commodity prices and rising interest rates.

The Illinois Society of Professional Farm Managers and Rural Appraisers says excellent quality Illinois farmland was 2 percent lower in the first half of 2018, the result of low commodity prices and higher interest.

The University of Nebraska says Nebraska farmland declined by 3 percent, although the rate of weakness has improved from 2017 levels. The biggest drop is in tillable grazing land – down 6 percent. Survey participants say low commodity prices and tax policies are the main reasons for declining Nebraska land values.

As to the future of Midwest land values, there are several issues that Hertz says will have an impact on farmland prices. High-quality, productive farmland with good drainage, easy access and strong fertility will continue to sell best.

Recent talk from the Federal Reserve seems to indicate less likelihood for further 2019 short-term rate increases. That indication is only 6 weeks after it had forecasted two interest rate increases for 2019. Interest rate stability is helpful for this season’s farm operating loans, possibly easing downward pressure on land values.

Results of current trade negotiations will have an impact on commodity prices and farmland values, according to Hertz Farm Management.

The new farm bill features higher marketing loan rates on most program crops. It also increases program option flexibility on selecting either ARC or PLC. A producer’s selection will hold through 2020. But the operator can select either program in 2021, 2022 or 2023 on a farm and crop basis.