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 "I'm surprised how strong land values have been," said Randy Hertz
of Hertz Farm Management in Nevada, Iowa. "We're actually seeing a
slight uptick on the price of land, particularly in livestock
areas."
Grain prices, led by corn, fell to four-year lows this week on the
outlook for a record harvest. This can put pressure on the price of
land and squeeze bank accounts secured by it, since land is the main
collateral.
But Jim Farrell, head of Omaha, Nebraska-based Farmers National, the
largest U.S. farm management firm, said he also was surprised crop
land prices had stayed in line with or improved from last fall. In
Sioux County, Iowa, he said, one farm his firm sold last month went
for an area record of $20,400 an acre.
"We may see some deterioration when we get into the fall, but we
certainly haven't seen it yet," said Farrell, whose firm sells
farmland across the Corn Belt.
Cash corn is now below $4 a bushel at some Midwest elevators, a huge
drop from $7 to $8 in July 2012. While that is bad news for grain
planters, livestock producers are loving it. They have also cheered
as meat prices soar to record highs this summer during grilling
season.
So rangeland has been selling particularly well in the past few
months, in some instances at all-time highs, auctioneers said.
The resilience of land prices, always led by farmer demand, may be
tied to long-term bullishness about demand for U.S. grain and meat
exports.
But experts say sub-$4 corn will pressure farmers' bids in land
auctions this fall and lead land owners to reduce rents. More than
half the 250 million acres of corn, soybean and wheat land in the
United States are rented.
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"If we're going to see some pressure, it's going to be on cash rents
for 2015," Farrell said.
University of Illinois economist Gary Schnitkey, a widely followed
analyst, predicted the same trend in his latest 2015 farm budget
outlook for crops released this week.
"Overall, 2015 returns are projected at the same levels as 2014
returns, which are considerably lower than returns from 2010 through
2013," Schnitkey said. "These lower returns signal the need to
reduce 2015 cash rents."
For productive central Illinois land, Schnitkey estimates profits of
$245 an acre for corn in 2014, down from $384 last year. For 2015,
his number is $251.
For soybeans, he expects profits of $241 an acre in 2014 and $225 in
2015, compared with $429 last year. (Editing by Lisa Von Ahn)
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