MARC JACOBS
Hutch Post
Agricultural real estate values continue to show strength despite tight profit margins and uncertainty in commodity markets, according to a Farm Credit Services appraisal official.
Kirk Manker, who leads appraisal teams for Farm Credit Services of America, Frontier Farm Credit and Ag Country Farm Credit Services, discussed the latest farmland trends during an interview on the BW Morning Show.
Manker said Farm Credit’s 93 benchmark farms across eight states increased in value by an average of 1.9% from Jan. 1 to July 1. Values rose 3.5% during the 12-month period ending July 1.
“We continue to see a very resilient market,” Manker said. “We call it stable, but there are some areas of strength.”
Farm Credit uses benchmark farms that represent agricultural activity within their respective regions. The properties are appraised twice a year using verified real estate transactions rather than survey responses.
Manker said Farm Credit’s appraisal team collects, analyzes and verifies about 10,000 real estate sales annually. That information is used to establish values for the benchmark properties and identify market trends.
Several factors are supporting agricultural land values, including strong cattle prices, increased pasture values and the limited amount of farmland available for sale.
“When something comes up, we typically have buyers available,” Manker said. “Overall, the financial strength of our borrowers is strong. They are positioning themselves for that next purchase.”
Local farmers and ranchers remain the dominant buyers. Manker said producers account for between 80% and 90% of agricultural real estate purchases across Farm Credit’s service territory. Investors purchase some properties, but local producers continue to drive the market.
Manker said many buyers view agricultural property as a long-term or legacy investment instead of focusing solely on current commodity prices.
“They take pride in ownership, and they take pride in passing that down to the next generation,” he said.
Demand varies between cropland and pasture. Cropland sales are more common in eastern portions of the region, while larger areas of grassland are found farther west and generally change ownership less frequently.
Cash rental rates are also expected to remain relatively stable. Manker said rental prices historically follow land values, and property owners do not appear ready to reduce their rates.
Looking ahead, Manker said the market appears positioned to remain stable, with possible areas of continued growth. The amount of available land will remain a major influence as the fall auction season approaches.