December 2018 Wallace’s Farmer “MarketPlace Extra”
By Doug Hensley, President of Real Estate Services
Fall harvest operations have nearly concluded across the State of Iowa. Despite variable growing season conditions, strong yield expectations were met (or exceeded) in most regions of the state. Strong overall yield results will be supportive to a land market that otherwise faces some headwinds going into the off-season including higher interest rates, relatively weak commodity price levels, and significant trade uncertainties.
Localized differences in yield results are playing a slightly larger role in farmland sale results this fall and early winter. Early season sales are already reflecting this uneven trend. In areas where another big crop was produced there appears to be more strength and overall stability in the land market, even in the face of lower grain prices. Essentially, these big production areas are ‘out-busheling’ the weakness in crop prices, per se. However, in localized areas where crop yields were average or below there has been a more noticeable softness to the land market. Regardless of the area, high-quality farms with the most productive soils, solid drainage, easy farm-ability and strong fertility continue to sell best. And, in spite of some of the negative factors in the land market, farmers continue to pursue acquisition opportunities when they make sense to the core operation of their business.
To better understand the land market, continue to pay special attention to a handful of key issues. First, as described above, learn whether the area you are interested in had strong or weak crop production in 2018.. Production success/disappointment from area to area has set the mood in the countryside in our current sales season. Second, keep an eye on increasing interest rates, as higher rates will continue to pressure farmland values. As of this writing, the Federal Reserve is expected to again raise short-term rates at their December meeting, which follows a consistent pattern of bumping short-term rates since late 2016. While short-term rates don’t directly impact long-term borrowing costs, short-term rates quite directly impact farm operating notes, which are now squarely in focus as we are in operating loan renewal season. And, since early fall of 2018, long-term rates have appreciably increased for the first time in many years. Third, the disruption in the commodity markets by the enactment of global trade tariffs is real and has softened US grain markets. How global trade negotiations play out in the weeks and months ahead will continue to impact commodity prices, market confidence and, ultimately, underlying asset values, including farmland. Next, as mentioned last month, as we approach the 2019 growing season there will be a reset in crop insurance price levels for 2019. If things don’t change in the grain markets, these revenue policy price levels will reset to significantly lower levels for 2019 production and will add more pressure to an already stressed market. Finally, negotiations continue on the new Farm Bill in the current lame-duck Congress. Any new Farm Bill policies will likely impact the countryside for the next several years. Stay tuned for further analysis as new information surfaces on all these topics.
NORTHWEST
O’Brien County:
72 +/- acres, located southeast of Granville, recently sold at public auction for $14,000 per acre. The farm consisted of 67 +/- tillable acres with a CSR2 of 94.5, and equaled $159/CSR2 point on the tillable acres.
NORTH CENTRAL
Hancock County:
59 +/- acres, located southeast of Corwith, recently sold at public auction for $9,100 per acre. The farm consisted of 58 +/- tillable acres with a CSR2 of 78.9, and equaled $117/CSR2 point on the tillable acres.
NORTHEAST
Allamakee County:
154 +/- acres, located south of Lansing, recently sold for $10,000 per acre. The farm consisted of 150 +/- tillable acres with a CSR2 of 64.1, and equaled $160/CSR2 point on the tillable acres.
WEST CENTRAL
Calhoun County:
40 +/- acres, located northeast of Yetter, recently sold at public auction for $10,500 per acre. The farm consisted of 39 +/- tillable acres with a CSR2 of 87.2. The sale equaled $124/CSR2 point on the tillable acres.
CENTRAL
Marshall County:
130 +/- acres, located southwest of Clemons, recently sold at public auction for $9,100 per acre. The farm consisted of 126 +/- tillable acres with a CSR2 of 81.7. The sale equaled $115/CSR2 point on the tillable acres.
EAST CENTRAL
Cedar County:
154 +/- acres, located northeast of West Liberty, recently sold for $8,409 per acre. The farm consisted of 140 +/- tillable acres with a CSR2 of 82.4. The remaining 14 +/- acres consisted of CRP and waterways. The sale equaled $112/CSR2 point on the tillable cropland acres.
SOUTHWEST
Fremont County:
193 +/- acres, located southeast of Percival, recently sold at public auction for $4,300 per acre. The farm consisted of 191 +/- tillable acres with a CSR2 of 67.7. The sale equaled $64/CSR2 point on the tillable acres.
SOUTH CENTRAL
Wayne County:
344 +/- acres, located west of Cambria, recently sold at public auction for $4,700 per acre. The farm consisted of 314 +/- tillable acres with a CSR2 of 57.1.The remaining acres were in terraces, roads, and waste. The sale equaled $90/CSR2 point on the tillable acres.
SOUTHEAST
Louisa County:
101 +/- acres, located south of Columbus Junction, recently sold at public auction for $4,350 per acre. The farm consisted of 76 +/- tillable acres with a CSR2 of 76.5, of which 18.5 acres were in CRP, with the balance of the farm in roads and waste. The sale equaled $75/CSR2 point on the tillable acres.
Hertz Real Estate Services compiled this list, but not all sales were handled by Hertz. Call Hertz at 515-382-1500/800-593-5263 or visit www.Hertz.ag.
