Surprise! Some area land values seem to be rising
WEST FARGO, N.D. — Brent Qualey realizes that what he's about to say will surprise many in Upper Midwest agriculture.
Despite poor crop prices and tough-to-achieve farm profitability, overall area land values have, in his experience, inched upward from a year ago, said Qualey, a veteran area real estate salesman and appraiser.
"Land prices are steadying up a little bit. That surprises a lot of people," Qualey said.
Qualey spoke Sept. 11 at the 38th annual Big Iron farm show in West Fargo. The three-day event ended Sept. 13.
The show focused on the biggest, newest types of farm equipment, as well as agricultural inputs. But Big Iron offered a number of seminars, too.
Qualey, with Farmers National, was part of a session that examined farmland values and rental rates. Also on the panel were two of his Farmers National colleagues, Kyle Nelson and Jayson Menke. Qualey and Nelson are based in Fargo, Menke in Grand Forks. The three are regular presenters at Big Iron.
Farmers National describes itself as "the nation's leading agricultural landowner services company."
Upper Midwest farmland prices generally soared during the 2008-2012 ag boom that brought high crop prices and strong farm profitability. But land values stabilized after the boom ended and, in the past few years, declined. Poor crop prices and concern over the effect of Trump administration trade policies on U.S. ag exports have led many in ag to assume that farmland prices will continue to drop.
But in recent months, "a very, very busy summer," Farmers National was involved in farmland sales from "Ulen, Minn., to Minot, N.D., and to southern North Dakota. And in virtually every instance, the price we received has met our expectations or exceeded our expectations," Qualey said.
Traditionally, prices of high-quality, particularly productive farmland hold up much better than the prices of less-productive farmland. That remains the case, Qualey said.
"Quality still matters," he said. "But by and large, the tone of the market has surprised us, given all that's going on in agriculture."
So why are farmland values rising again?
Established farm operators appear to be at least part of the answer. They have money in the bank, typically at low interest rates, and think that buying farmland could provide a better return. So when farmland comes up for sale, they buy it at what they consider reasonable prices, Qualey said.
New and improved crop varieties, which hold up relatively well in dry conditions and offer better potential for good yields, also may be influencing buyers, he said.
Farmland sales haven't been strong everywhere, however. For instance, sales have been relatively quiet this year in the northern end of the Red River Valley of eastern North Dakota and western Minnesota, apparently due at least in part to weather, Menke said.
There's a perception by many, both in and out of ag, that farmland sales often go to out-of-state non-farmers who buy land as an investment.
But that's not the case, at least not in most areas, Nelson said.
"By and large, local operators, local buyers, are driving the market," he said.
Many in regional ag also have expected that farmland rental rates will continue to decline. Like land values, they rose from 2008 to 2012 before leveling off and then, in the past few years, declining.
But there's strong demand to rent land, and early signs indicate that farmland rental rates in 2019 will hold steady, Menke said.
"There are certainly farmers who don't think that should be the case. But demand is the key," Menke said.
Agweek's annual cover story on farmland rental rates, to run late this year, will took a closer look at what farmers are paying to rent land in 2019.