July 2019 Wallace’s Farmer “MarketPlace Extra”

Last month I reported that it had been a somewhat uneven start to the 2019 crop year. Never did I think I’d report a month later in this same column that due to continued cold, wet planting conditions we still haven’t finished planting our corn or soybean crops here in the Midwest! The eastern Corn Belt, in particular, has suffered from poorer overall conditions, as farmers in Illinois, Indiana, and Ohio fell well behind the progress that was achieved in the western Corn Belt. With that said, it is important to note that almost no one has had an overly smooth 2019 planting season; and, as of this writing, there is still much to do!.

With this historically late spring planting season, farmland sales have somewhat taken a back seat. This is normal for the market to pause, as field activities take center-stage. Coming into spring, 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. These qualities have become even more pronounced with the struggles of the 2019 growing season bringing to light the real differences between farms. Even in the face of much uncertainty this spring, farmers were buying nearly 8 out of every 10 farms brought to the market, although non-farming investors have been an active and influential buying segment in most corners of Iowa for quality row-crop farms.

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, there are also several issues of note. In the past 60 days, long-term interest rates have actually started to drift lower. In a recent conversation I had with a prominent Midwestern lender, the comment was made that over the past 30-45 days they had been working with clients who locked down long-term mortgage rates in 2018 and are now refinancing into even lower rates. So, while most short-term operating notes did reset to higher levels this past winter, rates on long-term mortgage products have again settled into a lower range than those of even six to nine months ago, which is supportive to land values. In addition to lower interest rates, commodity markets will continue to be a major influencer in actual farm profitability, as well as the collective confidence/psyche of the Midwestern land market. Huge early-season expectations for 2019 crops, coupled with massive ending stocks and an uncertain global trade situation, were pressuring the corn and soybean markets for the first four-and-a-half-months of 2019. But when the trade realized the enormity of the problem with 2019 planting progress, the markets began to react accordingly, and both corn and soybeans prices have pushed appreciably higher in recent weeks. Finally, I think the countryside is still working to maintain a hopeful and positive attitude regarding global trade negotiations. But fatigue is setting in. With the recent reported collapse of negotiations with China, in addition to a new tariff threat towards Mexico designed to spur assistance/action on illegal immigration, positive attitudes are becoming more difficult to find. The outcome of these trade situations will absolutely impact commodity prices and underlying asset values, including farmland. It’s fair to say that 2019 has quickly become one of those years that is sure to be discussed (and compared against) for years to come. As we grind deeper into the growing season, keep an eye on all these factors, as they are sure to impact the land market in your local neighborhood.

NORTHWEST

Dickinson County:

80 +/- acres, located south of Terril, recently sold at public auction for $7,000 per acre. The farm consisted of 72 +/- tillable acres with a CSR2 of 80.3, and equaled $97/CSR2 point on the tillable acres. Of note, this farm was divided by a drainage ditch, thereby separating the land into two tillable parcels.

NORTH CENTRAL

Hancock County:

146 +/- acres, located near Forest City, recently sold for $9,247 per acre. The farm consisted of 145 +/- tillable acres with a CSR2 of 82.0, and equaled $114/CSR2 point on the tillable acres.

NORTHEAST

Fayette County:

59 +/- acres, located northwest of Wadena, recently sold for $4,423 per acre. The farm consisted of 59 +/- tillable acres with a CSR2 of 49.4, and equaled $90/CSR2 point on the tillable acres.

WEST CENTRAL

Guthrie County:

80 +/- acres, located north of Adair, recently sold in an online-only auction for $5,150 per acre. The farm consisted of 74 +/- tillable acres with a CSR2 of 58.9, and equaled $94/CSR2 point on the tillable acres.

CENTRAL

Marshall County:

80 +/- acres, located southeast of Liscomb, recently sold at public auction for $13,200 per acre. The farm consisted of 78 +/- tillable acres with a CSR2 of 97.2, and equaled $139/CSR2 point on the tillable acres.

EAST CENTRAL

Johnson County:

93 +/- acres, located west of Lone Tree, recently sold for $7,450 per acre. The farms consisted of 91 +/- tillable acres with a CSR2 of 66.9, and equaled $114/CSR2 point on the tillable acres.

SOUTHWEST

Adams County:

77 +/- acres, located northwest of Prescott, recently sold at public auction for $4,100 per acre. The farm consisted of 67 +/- tillable acres with a CSR2 of 57.1, and equaled $83/CSR2 point on the tillable acres.

SOUTH CENTRAL

Madison County:                                                                         

117 +/- acres, located northwest of Lorimor, recently sold at public auction for $6,100 per acre. The farm consisted of 109 +/- tillable acres with a CSR2 of 68.3, and equaled $96/CSR2 point on the tillable acres.

SOUTHEAST

Wapello County:

80 +/- acres, located west of Packwood, recently sold at public auction for $6,750 per acre. The farm consisted of 68 +/- tillable acres with a CSR2 of 76.1, and equaled $104/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.