BLOOMINGTON, ILL. (RFD NEWS) — Farmland sales are beginning to pick up as the traditional fall sales season gets underway, with inventory increasing across parts of the central United States and Southeast.
Spencer Smith with the American Society of Farm Managers and Rural Appraisers (ASFMRA) joined us on Wednesday’s Market Day Report with an update on current market trends, which he said are entering the period — from the end of harvest through the end of the year — when farmland transactions typically increase.
“We’ve seen a good flush of farmland that has come onto the market across the central part of the United States, as well as down into the Southeast,” Smith said.
Sale prices and farmland values have continued to hold, but Smith said the amount of inventory coming onto the market during the latter half of the year is something he is watching closely.
Harvest season brings more farmland to market
Smith said the traditional fall sales season is not unusual. Farmland often comes onto the market when it is no longer in production, leases are ending and harvest is underway.
“The latter half of the growing season in most parts of the United States, harvest is taking place, leases are coming to an end,” Smith said.
That can create a cleaner transaction for buyers because the property is not bound by a lease.
Farmer buyers may want to operate the land themselves, while investors may want flexibility in choosing who operates the property.
Commodity prices and margins remain in focus
Smith said production, commodity prices and interest rates will all play a role in farmland values as the market moves through the remainder of the year.
Producers are also getting a better understanding of income levels as harvest progresses.
“We’ve seen a little bit of compressed margins here that we’ve seen over the last couple of years,” Smith said.
In areas such as the Delta, Smith said margins remain compressed, although farmland values have continued to hold and there is still investor interest.
A harvest rally in corn and soybean markets across the central United States has provided some support, but Smith said it may not be enough to offset lower production in some areas.
He cited reports of 230-bushel corn in parts of the Midwest, while noting that some areas have historically seen average yields of 250 to 270 bushels.
“As the production and prices are the two drivers of our returns, as one of those falls off and the other one hasn’t really, you know, bound up to be able to offset that, margins and returns are a little bit compressed this year,” Smith said.
Weather adds another layer of uncertainty
Weather has also affected production expectations in some areas.
Smith pointed to parts of central Illinois that received more than six inches of rain in a single event during the latter half of the summer. Other areas of the Midwest have also experienced repeated heavy rainfall.
Those conditions have contributed to uneven fields and areas of drowned-out corn and soybeans.
“That’s why, you know, my comments earlier, there are definitely some production that’s been decreased this year,” Smith said.
The full impact will become clearer as harvest progresses, but early reports indicate production is down somewhat in some areas.
Smith said drought-stricken and more marginal areas can face an even heavier impact on margins and overall production.
Farmers remain a major part of farmland demand
Farmer buyers remain an important part of the market.
Smith said six out of 10 to seven out of 10 farmland purchases are made by farmers or growers across the Midwest.
That makes tracking who is buying, who is selling, and how much land is available important as the market moves through the fall sales season.
For producers and farmland investors, Smith said the combination of production, commodity prices, interest rates, weather, and operating costs will continue to shape the market.
LEARN MORE: www.asfmra.org
