Softer U.S. farmland auction prices in
spotlight this autumn
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[October 25, 2014]
By Christine Stebbins
CHICAGO, Oct 24 (Reuters) - The red-hot
U.S. farm land market is cooling with prices for prime acreage steady to
lower so far this autumn but holding up better than expected with grain
prices near four-year lows, farm managers and auctioneers said on
Friday.
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"It's getting softer but there's no panic in the streets. The
market is taking a breather," said Jim Farrell, head of Omaha,
Nebraska-based Farmers National, the largest U.S. farm management
company.
The annual season for farmland sales and rent negotiations is in the
spotlight for the next four months with farmers, bankers and farm
managers nervously waiting to see if the consensus for a soft
landing in prices holds. Land acts as the main collateral for farm
loans and farmer spending.
"The high-quality farm land is maintaining its value and we're
seeing a little bit of retracement in the lower-quality land. There
hasn't been a high number of transactions," said Randal Fransen,
incoming president of the Illinois Society of Professional Farm
Managers and Rural Appraisers.
The lack of any substantial amounts of land for sale so far is
likely explained by most Corn Belt farmers being busy with harvest.
But amounts offered will be watched carefully as more auctions get
under way.
![](http://archives.lincolndailynews.com/2014/Oct/25/images/ads/current/ldn_sda012312a.png) "There still isn't much land on the market," said Randy Hertz, head
of Hertz Farm Management in Nevada, Iowa.
With benchmark corn prices down 40 percent from their record highs
in 2013, the drop in land returns has fed fears of a crash in land
values. In some locations, prime corn land producing 200 bushels an
acre has sold for 5 to 10 percent below last year's record highs
while less fertile land has gone for as much as 20 percent lower,
auctioneers said.
But the peculiarities of the farm land market have helped prop up
demand. Low interest rates have cut farmer returns from the bond
market but also made borrowing to buy land easier. But wild card
factors for farmers include who your neighbors are, what they farm,
their children and your own.
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"We've certainly seen the high-quality, highly sought-after farms
have not dropped much," Hertz said.
Hertz cited a sale of 80 acres in southeastern Iowa just last month.
"This 80 was right across the road from a hog production unit and
the farmer really wanted it," Hertz said. "A great farm, high
quality; a good, rectangle shape. He had a neighbor who pushed him
and it sold for $14,500 an acre," he said.
Land owners are also seen less likely to sharply cut rents than work
out more flexible contracts.
"On most of our leases if there is any negotiation we're talking
with the operator to put a variable component in the place which
would allow us to be paid more rent if the market turns around,"
Farrell said. "If we agree to a discount on a lease, we're asking
for a variable rate component." (Reporting by Christine Stebbins;
Editing by James Dalgleish)
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