COMMON GROUND BLOG

Farmland values in much of our four-state territory softened slightly in the last half of 2018, but remained stable overall.

Benchmark farmland values in Iowa, which generally is on the leading edge of changes in the real estate market, declined 1.4 percent in the last six months of 2018. For the year, farmland values were largely unchanged.

Nebraska and South Dakota each saw modest declines for the year. Only Wyoming experienced an uptick in benchmark farmland values, although the few number of farm sales in that state make it challenging to analyze its real estate trends.

 “The softening of the market in the latter half of 2018 wasn’t unexpected and, in fact, it better aligns farmland values to profitability in the grain sector,” said Tim Koch, chief credit officer for FCSAmerica. “While producers in many areas of our territory benefited from strong yields in 2018, the industry continues to be challenged by compressed margins. For producers who rent farmland, softening in the market will help their bottom line.”

Compared to the market’s peak, farmland values are down 19.5 percent in Nebraska, 18.1 percent in Iowa and 12.0 percent in South Dakota. Continued pressure on profit margins could lead to additional softening in 2019. However, the same factors that have helped to stabilize the market for the past three years remain in place, including interest rates near historic lows and strong demand for quality land that is in tighter supply.

The chart below reflects changes in farmland values for FCSAmerica’s 64 benchmark farms. The number of benchmark farms in each state is noted in parentheses.

Fourteen of Iowa’s 21 benchmark farms decreased in value in the last six months of 2018, while two increased and five showed no change. In Nebraska, eight farms declined in value, six increased and four showed no change. Twelve benchmark farms in South Dakota showed no change in value, four increased and seven decreased in value. Wyoming’s cropland benchmark farm experienced a 4.2 percent increase in value and its pasture unit improved 2.0 percent.

FCSAmerica appraises its benchmark farms twice a year, in January and July. In addition, the cooperative compiles records from farmland sale in its four states. The cooperative’s objective in using the benchmark farms is to track real estate values without the influence of changes in land quality on sale prices.

Below is state-by-state data on actual land sales. The information reflects the average per-acre price of sales on a quarterly basis.

IOWA: The average price for unimproved ground sold for nearly $8,300 per acre in the fourth quarter of 2018, which is in line with historic trends. Twenty percent of all sales had a per-acre price of more than $10,000. The highest per-acre sale in the fourth quarter was $16,500 in Polk County. Public land auctions increase 10 percent compared to 2017, although total cropland sales were consistent with the prior year. “No sale” auctions increased to 4.7 percent in 2018, up from 2.7 percent in 2017.

NEBRASKA: Dry cropland prices increased substantially during the fourth quarter of 2018, reaching their highest level since 2012. Soil quality also experienced an uptick. Location impacted both price and soil quality, with 87 percent of sales reported in the eastern third of the state, up from 60 percent in the fourth quarter of 2017. The total number of dry cropland sales rose 9 percent compared to 2017.

Sale prices and land quality also rose for irrigated cropland in the fourth quarter. The average per acre price of $6,300 in the last quarter of 2018 was in line with values over the past few years. Sales in 2018 were down 15 percent compared to the previous year.

Public land auctions were up 1 percent, while “no sale” auctions declined -- from 4.3 percent in 2017 to 2.9 percent in 2018.

SOUTH DAKOTA: Unimproved cropland values increased significantly during the fourth quarter of 2018 as a result of a spike in average soil quality. Location impacted both price and soil quality, with 76 percent of fourth-quarter sales reported in the eastern third of the state, up from 67 percent during the fourth quarter of 2017.

Sales increased 13 percent in 2018 compared to 2017, and public land auctions were up 40 percent. “No sale” auctions dropped to 5.6 percent, down from 5.9 percent in 2017.