The trend in Wisconsin farmland values since 2001 has been upward, says Arlin Brannstrom, University of Wisconsin Extension farm management specialist, “but in 2009 we saw that leveling off and actually declining slightly, from a statewide average of $3,245 an acre in 2008 to $3,190 per acre last year.
“It’s not a significant drop, but land prices have softened a bit,” he notes.
• Farmland values declined $55 per acre from 2008 to 2009.
• The dairy crisis impacted farmland values.
• The number of farmland sales has dropped 40% since 2004.
Dairy crisis takes toll
Brannstrom blames the dairy crisis for lower prices because most bare farmland is purchased by farmers, and they had drastically lower incomes in 2009.
“2009 was a disaster, and 2010 isn’t shaping up to be good either. Dairy farmers’ equity has been eroded,” he says. “And non-ag investors have all but disappeared.”Brannstrom notes that “land isn’t worth any more than you are able to pay for it.”
So who is buying farmland?
“Some larger farms may be buying more land to meet their nutrient management needs, or the neighbor’s 80 acres came up for sale and it’s a once-in-a-lifetime opportunity,” he explains.
While prices for bare farmland have held surprisingly steady, dropping only $55 an acre from 2008 to 2009, the number of farmland sales has fallen off a cliff. In 2009, only 68,653 acres of bare farmland sold in Wisconsin, compared to 117,000 acres in 2004.
“That’s a 40% drop,” Brannstrom notes. In 2008, 92,474 acres of bare farmland were sold in Wisconsin.
The sales Brannstrom tracked for his analysis were for bare farmland parcels only between 35 and 1,000 acres.
“If there was a house or buildings on the land, I exclude those sales,” he explains. “I don’t include anything that is sold between relatives.”
Brannstrom also excluded land sales on or near a lake, and sales less than $300 per acre and more than $10,000 an acre — he’s assuming they are not being used for agricultural purposes.
“Up until 2009, Wisconsin agricultural land values have been increasing steadily for several years,” he adds. The statewide price of bare farmland increased 54% between 2001 and 2007, and rose another 12% between 2007 and 2008.
“But if mortgage rates increase significantly, or if commodity prices swoon again, land values will not be immune,” Brannstrom believes.
This article published in the May, 2010 edition of WISCONSIN AGRICULTURIST.
All rights reserved. Copyright Farm Progress Cos. 2010.