The U.S. farmland market continues to be hot, with values reaching a two-year high, according to Farmers National Company, one of the nation's leading agricultural services company. Availability of quality land is tight, bringing fast sales and top dollar for properties the company says.
"What surprises us is the rate of increase over the last 12 months," says Lee Vermeer, AFM, vice president of real estate operations at Farmers National Company. "Values are up 20 to 25%, compared to rises of 5 to 10% in 2010. We are looking for 2012 to be another profitable year for those selling land."
Farmers National Company has seen record auction activity during the last six months as more properties are being sold at auction to maximize profits. Tight supply of quality land has also prompted buyers to look at less productive land that can be upgraded, according to Vermeer.
Strong grain prices are boosting profits for farmers, prompting them to pursue land in order to expand operations. In addition, cash rents in top production areas have increased 25 to 40% during 2011.
"Farmers make up 75% of the buyers in the market, despite continued strong interest from investors," says Vermeer. "Land continues to be a tangible investment that has performed well, thus the demand."
While Farmers National Company projects brisk activity to continue, there are market factors that could impact the future of farm values.
"Overall the upcoming year looks positive," said Vermeer. "However, poor performance in the commodity market over the next year could bring downward pressure on land values. Good weather world-wide could result in a crop surplus, dropping prices. In addition, inflation would boost interest rates, negatively affecting land values."
Illinois is leading farmland sales trends in the East Central region, according to Roger Hayworth, area sales manager for Farmers National Company in Illinois, Indiana, Ohio, Michigan, eastern Kentucky, and eastern Missouri. Land values, as well as sales prices, are highest in Illinois, followed by Indiana and Ohio. Prices in Ohio have reached $6,500 per acre, he says. Land in Illinois are bringing in $9,500 per acre on average for high quality land. Values in Indiana are up to $8,000 per acre.
According to Hayworth, the number of land buyers in the market continues to increase as large farm owners, combined with investors, are looking to increase land holdings. Values continue to move upward and farmers and investors are paying cash for land.
"More land transactions are taking place today as compared to a year ago," said Hayworth. "There has been a definite continued uptick in the number of listings and auctions within this area, as availability of land has loosened a little because of more active sellers."Farmers National Company has sold over 3,000 farms and more than $1.7 billion of real estate during the last five years. Farmers National Company currently manages more than 5,300 farms in 24 states. Additional services provided by the company include auctions, appraisals, insurance, consultation services, oil and gas management, lake management and a national hunting lease program. For more information on land listings in your region, visit the Farmers National Company website at www.FarmersNational.com.