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Common Ground
Farm Credit Services of America Blog

Farmland Values Moderate

by FCSAmerica Staff Reports | Jan 22, 2015

Our appraisal team monitors, compiles and reports real estate sales information for the Association’s four-state region of Iowa, Nebraska, South Dakota and Wyoming. Information is compiled on thousands of farm real estate transactions, including unimproved farmland real estate auctions. The team also monitors 64 benchmark farms and updates their values every six months.

The chart below provides the average change in benchmark farm values as of January 2015. The number of benchmark farms is shown in parenthesis after each state.

State

Six Month

One Year

Five Year

Ten Year

Iowa (21)

-6.06%

-6.93%

86.15%

196.69%

Nebraska (18)

-1.69%

-0.18%

124.34%

289.82%

South Dakota (23)

1.99%

7.79%

116.28%

284.03%

Wyoming (2)

1.08%

6.95%

12.49%

61.64%


Land prices and the demand for farmland have moderated across the Association as a result of the uncertainty created by lower grain prices. As corn prices settle at $3.50 to $4.00 per bushel, profitability on higher-priced land is top of mind for many producers. Lower commodity prices and decreased margins are putting pressure on cash rents and overall land prices.

The market decline in farmland was widely reported by various real estate organizations during 2014. A softening in the land market is reflected in the reduction in benchmark farm values. However, the extent of the reduction is smaller than many anticipated as weakened cropland values have been slightly offset by gains in pasture values.

Six-Month Change in Value

State

Cropland

Pasture

Iowa

-7.1

0.2%

Nebraska

-4.8

5.9%

South Dakota

-4.6

4.8%

Wyoming

0.0%

1.7%


Public land auction activity for FCSAmerica’s four states is 7 percent lower than in 2013. While Iowa and Nebraska experienced reductions in auction activity, South Dakota showed more sales than a year ago. Wyoming historically has had very few reported auctions.

The benchmark farm trends in the final six months of 2014 indicate:

Iowa: Average benchmark farm values declined 6.1 percent. Only one farm increased in value. The 15 farms that decreased in value declined an average of 8.8 percent. Land values for five of the 21 farms did not change.

Cropland values moderated at the end of 2014 after reaching all-time highs during the second quarter. The average price for unimproved ground sold during the fourth quarter of 2014 was $8,698, which is similar to the average price experienced in the second quarter of 2012. The largest sale in the fourth quarter was $15,300 per acre in Plymouth County. Only 30 percent of all sales in the fourth quarter had a per acre price of more than $10,000. This is down from 50 percent a year ago.

Nebraska: Benchmark farm values decreased 1.7 percent in the past six months and 0.2 percent during the last year. Five of the 18 farms increased in value, while four showed no change in value.

Dry cropland prices have had significant price fluctuations during the last four years. Land prices experienced a significant drop in the third quarter of 2014 but rebounded during the fourth quarter. The average price per acre of $5,348 during the fourth quarter of 2014 is similar to a year ago. The total number of sales in 2014 is down nearly 25 percent from 2013 while the average price per acre has declined 5 percent.

South Dakota: Thirteen of the 23 benchmark farm values increased or experienced no change over the past six months. Overall benchmark farm values increased 2 percent in the last six months and 7.8 percent since January 2014.

After a significant jump at the end of 2013, unimproved cropland values experienced a sharp decline during the first and third quarters of 2014. Cropland values appear to have stabilized around the $5,000 mark, which is similar to values experienced at the end of 2012. Both the number of sales and the price per acre have been reduced by approximately 15 percent compared to 2013.

Wyoming: The two benchmark farm values increased 1.1 percent.

The limited number and diverse nature of the sales, as well as highest and best use, create a challenge in determining sales trends. Price per acre has gradually declined in 2014 on completed sales and dropped below $1,200 during the fourth quarter of 2014.

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