Land Prices Make Good Table Talk

Buckeye Farm Beat

The National No-till Conference was filled with good ideas for production, but the breakfast conversation focused on “crazy” land prices.

Published on: January 16, 2011

With 800 farmers from about 30 states gathered in Cincinnati last week for the National No-till Conference, the talk in the main sessions at the Hilton Hotel’s Hall of Mirrors focused on production practices. Look for reports of those discussions in the February issue.

However, at the morning breakfast Thursday the farmers gathered at the table I was sitting at were interested in land prices. We had farmers from Colorado and Kansas, Missouri and Indiana and Iowa enjoying a big breakfast sponsored by Syngenta. Before the company reps could get on with their panel presentation, however, there was consensus at the table that one word described the current market for farmland, “crazy.”

So crazy in fact that all of the folks at that table were sitting on the sidelines in terms of buying or selling land. The farmer from the plains of Colorado reported that a syndicate from the Dakotas had recently descended on the area and purchased somewhere around 40,000 acres. Most of the land he said was not prime farm ground. Locals he peeled off some their least productive acres despite the fact that the land had sold at much higher prices than land in the area was bringing. “These fellows didn’t really do their research very well,” the gentleman, who farmed about 4,000 acres himself, confided. “For what they paid they could have gotten some better ground, if they had known what to look for.”

The farmer from eastern Kansas noted that buyers in his area were farmers who had money to invest from recent grain sales, but weren’t attracted to CDs, stocks or other traditional investments. “Even if they can only show a 3% return on the land investment, it’s better than what they figure they will do with anything else,” he said. He noted that in his own operation they expect a return-on-investment in the 10 to 15% area and therefore cannot afford to buy land at its current price in the area which is around $2,500 for non-irrigated farmland.

The Midwestern farmers reported sensational sales of $6,000 to $8,000 per acre. They marveled that farmers would be willing to spend that much. However, they noted that there was really very little land being offered so what was available generally attracted attention. “All it takes is two guys at the sale who are determined to get that piece and bidding doesn’t stop,” one of them noted.

The Iowa farmer agreed that farmers with money to spend seemed willing to average out the overall value of their land in order to increase their base. “It’s not too different than some guys do with cash rents that might be all across the board,” he said. “Some of the older farmers are working land they have had for decades.”

Everyone at the table was confident that land prices would simmer down once commodity prices returned to earth. “I’ve seen farmland prices go up and down in my lifetime,” on farmer noted. “I have never seen ’em this high, but I have never seen corn and bean prices this high either. I’m sure it will cycle around. Nothing lasts forever.”