August 2019 Wallace’s Farmer “MarketPlace Extra”

It’s hard to believe that we’re already approaching the typical ‘dog days’ of summer. It doesn’t seem like all that long ago we were watching corn and soybean planters legitimately race to complete spring planting, due to the very uneven start to the 2019 crop season across the Midwest. In many areas, the fact of the matter is that planting efforts didn’t conclude until the beginning of July! While the State of Iowa was far from perfect when it came to 2019 planting and early-season crop conditions, the impact of the incredible growing season struggles in Illinois, Indiana, Missouri, and Ohio makes conditions in Iowa look pretty tame. The corn and soybean markets have also noticed and have responded to move appreciably higher. All of this is sure to impact the Iowa farmland market, as we approach the typical fall sales season.

Coming into spring 2019, Iowa (and Midwestern) farmland values were largely stable. Good farms – those with above-average soil types, adequate drainage, easy farm-ability, and well-managed fertility levels – were selling best. Since the growing season started, there have been enough sales across Iowa to conclude the market is still stable…and maybe just a little stronger since the beginning of June. I’ve had many people ask me this summer, “How can we be talking about things being stable to stronger in Iowa after the difficulties of 2019 planting season?” The question is a fair one. I believe the answer is rooted in the reality that it appears much of Iowa is going to grow at least an average crop in 2019, if not slightly above average. With an average to above-average crop, stronger commodity prices could provide a real boost in profitability for Iowa farmers and landowners in 2019, because of the even larger problems elsewhere across the Corn Belt. Is this outcome guaranteed? Of course, not – 2019 has offered few guarantees! However, coming into the 2019 growing season, farmers were buying nearly 8 out of every 10 farms brought to the market. And if Iowa farmers realize increased profits in 2019, it’s quite possible that the Iowa land market will show signs of broad price support and strength not seen in recent years.

With that said, don’t forget about market fundamentals. I have shared in this column before that the farmland market reflects the collective confidence of all the participants in the market. When things are going well, farmland values tend to be stable to higher; while weakness in land values shows up when things are not working well. Locally speaking, there are always value differences when comparing one specific neighborhood to another. Localized growing conditions and local sale volumes will be two areas to watch through the end of the year, given the major growing season differences this year. Those differences are likely to show up this fall in the land market.

On a broader scale for US agriculture, there are also several issues of note. The current interest rate environment, and forward-looking guidance, is more ‘dovish’ than it was just six months ago. Lower rates will be supportive to anyone who needs to borrow money and will also be supportive to the farmland market. In addition to lower interest rates, I already mentioned the impact of stronger commodity prices. The price for both corn and soybeans significantly influences actual farm profitability, as well as the collective confidence/psyche of the Midwestern land market. With 2019’s problematic growing season, it seems the massive stocks we carried into 2019 may get whittled down a bit, thereby creating a more positive outlook for 2020… that is, assuming demand doesn’t wane too much. To that end on the demand side of things, although it appears the focus of early 2019 has now shifted from trade issues to production issues in the current crop year, the fact remains we’re still locked in a global trade conflict, with particular attention on China. Discussions aimed at resolving our trade conflict(s) appear to be ongoing and will continue to impact commodity prices and underlying asset values, including farmland. Finally, don’t ignore the possibility of a major ‘black swan’ type of unexpected market moving event. If African Swine Fever were to reach the US, it would be a big deal, and it would be damaging to our markets.

NORTHWEST

Clay County:

79 +/- acres, located northeast of Gillett Grove, recently sold at public auction for $8,500 per acre. The farm consisted of 77 +/- tillable acres with a CSR2 of 82.7, and equaled $105/CSR2 point on the tillable acres.

NORTH CENTRAL

Mitchell County:

160 +/- acres, located near St. Ansgar, recently sold in an online auction for $7,100 per acre. The farm consisted of 131 +/- tillable acres with a CSR2 of 87.4, and equaled $99/CSR2 point on the tillable acres.

NORTHEAST

Buchanan County:

42 +/- acres, located south of Hazelton, recently sold for $4,705 per acre. The farm consisted of 42 +/- tillable acres with a CSR2 of 44.7, and equaled $105/CSR2 point on the tillable acres.

WEST CENTRAL

Sac County:

115 +/- acres, located east of Wall Lake, recently sold at public auction for $10,500 per acre. The farm consisted of 113 +/- tillable acres with a CSR2 of 87.6, and equaled $122/CSR2 point on the tillable acres.

CENTRAL

Story County:

73 +/- acres, located north of Story City, recently sold at public auction for $10,600 per acre. The farm consisted of 72 +/- tillable acres with a CSR2 of 87.2, and equaled $123/CSR2 point on the tillable acres.

EAST CENTRAL

Benton County:

59 +/- acres, located south of LaPorte City, recently sold for $10,300 per acre. The farms consisted of 59 +/- tillable acres with a CSR2 of 86.4, and equaled $119/CSR2 point on the tillable acres.

SOUTHWEST

Montgomery County:

70 +/- acres, located east of Elliott, recently sold for $7,300 per acre. The farm consisted of 67 +/- tillable acres with a CSR2 of 68.8, and equaled $111/CSR2 point on the tillable acres.

SOUTH CENTRAL

Madison County:                                                                         

60 +/- acres, located southwest of Winterset, recently sold in an online auction for $5,500 per acre. The farm consisted of 49 +/- tillable acres with a CSR2 of 67.5, and equaled $99/CSR2 point on the tillable acres.

SOUTHEAST

Washington County:

80 +/- acres, located south of Riverside, recently sold at public auction for $11,000 per acre. The farm consisted of 77 +/- tillable acres with a CSR2 of 89.9, and equaled $127/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.