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Ag land values may be in limbo during 2017

By Staff | Jan 21, 2017

OMAHA (FNC) Several factors will come into play in 2017 that will determine the direction of land values.

Randy Dickhut, senior vice president of real estate operations for Farmers National Co., said that in the past three years, agricultural landowners in many regions across the country have seen a decline in profits, which also pushed land values lower.

“This winter, questions abound as to the direction of commodity prices, interest rates, inflation, challenges in the world economy, weather and U.S. tax law,” Dickhut said. “Buyers of ag land are asking if it is an opportune time to make a purchase of a farm or ranch, while sellers are asking if the market dynamics are indicating that it is good time to sell land.

“Depending on location, quality of land and other factors, our agents report seeing regions and local areas where land prices are stable to somewhat strengthening post-2016 harvest.

“Then there are other areas where land values have continued to decline.”

In Iowa, the second half of 2016 saw a jump in land auctions with a $34.859 million greater volume in the second half of the year and 3,763 more acres sold, said Sam Kain, national sales manager for Farmers National Co., based out of West Des Moines.

Auctions are the most successful approach to selling land in Iowa, with 97 percent of auctions resulting in a sale the day of the event.

Top quality land remains stable with a possible five percent decrease. Medium quality land is experiencing a 5 percent decrease and low quality land is seeing a 10 percent decrease

in value. Pasture ground remains stable.

Kain said he is seeing some land sales resulting from farmers experiencing financial pressures. Approximately 85 percent of buyers are local farmers and 15 percent are investors.

“The land market has been stronger since harvest was completed, which I attribute to above average yields,” Kain said. “For 2017, a lot will depend upon how much land comes on the market. Current commodity prices indicate land values should be trending downward, but if we continue to see so few farms come on the market, prices will stay steady.”

A key factor impacting land prices will be interest rates, Dickhut said. Grain and livestock prices affecting farm and ranch income also will influence land values.

“Foreign trade policy and its effect on agriculture will be closely watched over the next few months. Potential changes in tax laws could affect estate taxation and capital gains rules that in turn influence buying and selling decisions,” Dickhut said.

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