While this year has been anything but normal, farmland prices have been able to stay balanced so far into the year. However, due to the COVID-19 pandemic, it has changed the ways that farmland is being sold.
Farmland values held steady in the first half of 2020 in the Corn Belt states of Iowa, Nebraska, South Dakota, and Wyoming, says Deb Stanbro, president of the Iowa Chapter of American Society of Farm Manager and Rural Appraisers (ASFMRA) and an appraiser at FCSAmerica. Stable demand for land, decreased sales volume and low interest rates continue to provide support and the market adjusted to pandemic induced social distancing.
Rural Appraisers play a key role in the farmland market with sales and data analysis, timely asset valuation and professional service. The following information is provided by the Appraisers at Farm Credit Services of America (FCSAmerica) in support of the Iowa Chapter of the American Society of Rural Appraisers and Farm Managers.
In Iowa and Wyoming, benchmark farmland values increased 0.3 percent in the first six months of 2020. Nebraska experienced a decline of -0.4 percent, while South Dakota saw a larger but still modest drop of -2.0 percent. Tim Koch, chief credit officer at FCSAmerica, said overall declines in real estate values in Nebraska and South Dakota were at least partially influenced by broader declines in pastureland values of 4.0 percent and 4.7 percent, respectively. South Dakota also is seeing residual impact from last year’s flooding.
“In the central part of Iowa, the values indicated no change to an increase of 6.3 percent during this time period,” Stanbro said.
The pandemic impacted how farmland was sold with the methods of sale shifting as states issued guidance on social distancing. Public auctions declined 21 percent, 31 percent and 35 percent respectively in Nebraska, South Dakota and Wyoming in the second quarter compared to the same period last year. In Iowa, public auctions were down 8 percent. More buyers in the region chose to list land privately or through a Farmland Broker or Realtor.
“There still is liquidity in agriculture, and those who can afford it are looking for real estate,” Koch said. On the whole, he said, values continue to benefit from many of the same factors that have supported the market for the past few years.
According to Koch, the following factors will help determine the direction of the real estate market in the months to come:
- Already attractive interest rates reached historic lows during the early weeks of COVID-19. Indicators point to favorable rates for the foreseeable future.
- Federal aid to an industry hit hard by the trade war now includes payments to ease financial pain from the pandemic. While producers would prefer an environment in which government support wasn’t needed, the aid has been critical to farm income. Depressed commodity prices are currently signaling reduced farm income levels for 2020. Absent additional federal support, increased financial stress across a broad segment of agriculture would likely yield increased sales activity and the potential for further softening of real estate values.
- Buying continues in a tight real estate market. Across the region, the availability of dry cropland is down. Nebraska also saw fewer listings of irrigated land in the first half of 2020. Those in a position to buy see farmland as a secure, long-term investment. So far, it continues to be producers who are the predominant buyers, however, continued interest from investors looking to diversify their investment holdings continues to provide further support to farmland values.