By Victoria G. Myers
Progressive Farmer Senior Editor
Virginia H. Harris
Progressive Farmer Associate Editor
Everyone knew $7 corn could not last forever. Even as land prices topped the $10,000-per-acre mark in parts of the Midwest, there was that nagging voice asking, "What is an acre of ground worth when the value of the commodity it produces drops by half?" Murray Wise, head and founder of Murray Wise Associates, based in Champaign, Ill., believes cash rent rates will be the key to where cropland prices go in 2015.
Most land appraisers and farm managers across the country agree. Here's a look at what the next 12 months could hold in store.
DISCOUNTING THE MARGINS
Jeffrey Hignight is a farm manager with Glaub Farm Management, in Jonesboro, Ark. He believes the land market is headed for a plateau but doesn't anticipate any major corrections for good-quality cropland.
"Looking at the Delta region, land prices have not gone up as dramatically as they did in the Midwest, so there is not as much to lose. Changes in farm policy and lower commodity prices, however, lead me to believe a correction is due," he said.
Hignight expects more marginal land will come onto the market, and some lower quality ground may fall out of production. In the South, loss of direct farm payments will have a financial impact on rice and cotton producers. (www.glaubfm.com)
LIVESTOCK LEADS THE LAND MARKET UP
South Dakota stats from the USDA's Land Values 2014 Summary show a particularly heady increase in cropland values -- 21%. Even better were jumps in pasture prices, knocking on 30%. When it comes to the livestock side of agriculture, Shawn Weishaar said producers are optimistic.
"Cow/calf producers are very upbeat," said Weishaar, an independent appraiser based in Lemmon. They have lower feed costs, they are looking at record checks for calves they sell this fall, and, barring any major upheaval, they are doing quite well," he reported. That said, he doesn't see any reason why land prices here would start heading down in the next 12 months. (www.weishaarsales.com)
GRASSLAND AND CASH ARE KING
Keith Carlson, president and general manager of United Farm and Ranch Management, in Lincoln, Neb., called the demand for grass "terrific" given record cattle prices. The state saw a 40% leap in pasture prices in the latest USDA land value report. Cropland eked out just a 6.6% increase.
"Unless something unexpected happens in the cattle market, I don't see any reason to expect a correction on grassland values. If anything, over the next year, they'll just go higher," Carlson said. "But if corn and bean prices stay low, and the glut from this year's harvest gets added to another bumper crop in 2015, I would expect cropland values to drift some lower."
He believes land prices have essentially leveled and not fallen because of a limited supply of land for sale. Carlson expects marginal or poor land will lead any downturn. (www.ufarm.com/lincoln-nebraska)
RECREATIONAL LAND STAYS STRONG
In Alabama, agricultural land values are less about commodity prices and more about how well the general economy holds, said Howard Haynie, head of Howard W. Haynie and Associates.
He said recreational end users are influencing rural land prices, with ag values closely tied to income and population growth. There is no indication of a downturn ahead.
Haynie added cotton, cattle, poultry and timber historically have driven the agricultural economy; grain prices don't influence land values here in the same way they do in the Midwest. Turning to the timber market, the appraiser noted hardwood and pine prices are stable and slightly increasing, contributing to the overall stability of land values. (www.haynieappraisals.com)
DIVIDED OVER QUALITY
A split market is what Jeff Berg said he's seeing in North Dakota, and it's a trend he believes will continue into 2015.
The appraiser, with Crown Appraisals Inc., said producers are willing to pay top dollar for exceptional land that fits with their operation. Marginal land brings $1,500 to $2,000 an acre less. "Buyers are becoming very discriminating," Berg said. He credits the caution to lower commodity prices, which means the less-productive land, requiring more inputs, has to be carefully scrutinized to determine whether it's a good long-term acquisition. (www.crownappraisalsinc.com)
MILKING THE LAND MARKET
Wisconsin's agricultural land market is an island of steady sales and increasing prices, a point that doesn't surprise Dennis Badtke. What's behind those prices right now is milk.
This chief appraiser, with Badgerland Financial, said record milk prices are the reason dairy farmers are expanding land bases. A review of area sales showed dairy farmers were the leading land purchasers. Areas without the strong influence from dairy may see a downturn in prices next year, he said, with row crop -- intensive areas more likely to see a correction. (www.badgerlandfinancial.com)
ROLLER COASTER LAND RIDE SLOWING
Don't expect to see a correction in Missouri's farmland market in the next year, Howard Audsley said. This appraiser, who heads Audsley and Associates, out of Columbia, does, however, believe the upward trend in prices has plateaued.
"Whether or not we go down after this, I don't know. It's a roller coaster. We've made the climb up, now we're at that flat spot at the top. No one really knows where we go from here."
Grain prices are not conducive to keeping land values at current levels, but a bumper crop will lessen the impact of lower per-bushel prices. That means farmers will have money to spend if something they want is for sale.
"There is not much available in the land market right now," he added. "But I would say that if a person has been waiting, riding up the market, and they want to sell, now is probably the time. There is not a lot of potential upside left. If prices start to move down, everyone will be heading for the exits, and we probably won't get these kinds of prices back anytime soon." (www.modirt.com)
Editor's Note: For more information, visit the American Society of Farm Managers and Rural Appraisers website at www.asfmra.org. All sources are ASFMRA members.
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