Demand for Iowa farmland has hit record highs this winter as the supply of farms being offered for sale has sunk to record lows. The same is true nationwide, according to a report from Farmers National Company, a large farm management and farmland realty firm.
Demand for U.S. farmland has jumped to a five-year high, spurred on by a profitable grain market and a boost in buyer interest from both farm operators and land investors. While demand rose sharply during the last quarter of 2010, the supply of available farmland fell to historically low levels, says the report.
"There are a number of factors driving this increasing demand, which we see continuing into 2011," says Lee Vermeer, vice president of real estate operations at Farmers National Company. "Jumps in commodity prices are increasing the profitability of farmland as an investment. Landowners are using the profits to increase land acquisitions. They are investing in their own operations as land values are stabilizing and in many cases increasing."
It is farmers who are buying most of the farmland being sold
Vermeer says while increasing values are boosting the interest in farmland by outside investors, it is farm operators who are 85% of the buyers. "Farmland purchases have also become an attractive investment for non-operators in this environment," says Vermeer. "It's definitely showing a more favorable return on investment than traditional investments like the stock market and CDs."
Prices for quality land are at levels that are high or higher than they have ever been in most of the North Central Region including Iowa, Missouri, Minnesota, South Dakota and North Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. In many areas of Iowa, top quality land is selling in the $8,000 to $9,000 per acre range.
Iowa land values have jumped considerably in last 60 days
"I would say in some areas of Iowa and Minnesota land values may have jumped as much as $1,000 an acre in the last 60 days, with prices at $6,200 per acre in Minnesota," says Kain, who is based in Des Moines. "Demand remains very strong in all areas as there is a limited supply of properties for sale."
Kain says increased interest from investors is pushing farmland prices upward. However, he notes that the majority of the sales are still going to local farmers. "Land values in this region are likely to continue an upward trend," says Kain. "Commodity prices definitely point upward, but these trends can quickly change as world issues change."
For information on listings in your region visit www.FarmersNational.com. Farmers National is an employee-owned company, and the nation's leading ag real estate, and farm and ranch management company. The firm sold over 2,600 farms and more than $1.25 billion of real estate during the last four years. Farmers National manages 5,000 farms in 23 states. Additional services provided by the company include appraisals, insurance, consultation services, oil and gas management, lake management and a national hunting lease program.
Many absentee landowners sell land below market value
There are a significant number of landowners benefiting from the recent jump in farmland values. However, there is a segment of absentee landowners who are missing out on maximum profits due to a lack of market understanding, according to agricultural real estate experts who track market activity.
As land values move up quickly, many absentee landowners are falling behind the curve in private property sales. Lee Vermeer of Farmers National Company says nearly 20% of private treaty sales transactions are in this category. He says the numbers keep increasing and the gap widening as values in the open market are rising. "Our appraisers come across numerous sales in almost all states and counties that have sold well below the current market," he says.
"Examples of farms that have sold at $500 to $1,000 per acre below the market are common and instances of $2,000 below the market have been found. If a landowner sells 160 acres at $1,000 below what they could have received if offered to the open market, they will lose $160,000. This scenario happens often in this rapidly changing market."
Vermeer advises absentee landowners to keep current on market trends and sales data, even if they are not currently looking to sell. It's vital to seek regular advice from a professional land real estate company, and track state and county sales online at a website such as his company's site where landowners can keep apprised of market changes that affect land they own. "You never know when an opportunity to sell could arise, and knowing the market puts a landowner in an optimum position. Knowledge is always valuable," he says.