Farmland Prices in 2015
By Mason Spurgeon, Certified General Real Estate Appraiser
“What Are Land Prices Doing?”
I am often asked "what are land prices doing? or what’s my farm worth?" and I respond with "it depends on the type of farm property you are talking about." This is a very difficult question to answer in general terms due to the many different factors in the farm market for different types of land and their locations.
How We Studied the Farm Market
In completing this farm market study, I used our internal database of extensive farm sales data to perform an analysis between 2014 and 2015 farm sales. This is a very difficult task to perform because of the lack of true resales, the same farm property selling each year without being altered in any way. This is the only true way to tell if the farmland market has changed, but these types of sales are very rare, so appraisers are forced to compare similar farm sales to determine if there is a difference in land values from one year to the next.
I have analyzed sales in Hancock County, Illinois, and Lewis County, Missouri. These two counties were used because of their location and amount of farm sales data, still a very limited amount but much better than other counties throughout the area. Between 2013 and 2014 there was a sharp decline in the total number of farm sales in these counties. However, between 2014 and 2015 the number of sales was similar. The supply of farm market sales did not increase or decrease between 2014 and 2015.
In completing my analysis, I started by breaking all of the farm sales into categories based on their percentage open and county. Then I averaged all of the prices for the different land categories and the total land prices for all of the farms.
Farmland Prices | 2015
How the Study Was Done
Comparing similar farm sales, since true resales are very rare.
Gather the Sales
2014 and 2015 farm sales from our internal database, in Hancock County, IL and Lewis County, MO.
Sort by Category
Group every sale by its percentage open (tillable) and by county.
Average and Compare
Average the prices for each land category and all farms, then compare year over year.
A Word of Caution
Averages are very dangerous in the farm appraisal world and should be used with caution.
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
Mixed Results for 2015
My findings after analyzing these two farm markets were very interesting. According to the sales data it appears that the results are mixed. In both counties it appears that farms that are highly tillable appeared to have stayed stable, but in Lewis County less tillable farm tracts appear to have fallen slightly and in Hancock County they increased. However, these conclusions were drawn with very limited sales data, much less than would be ideal for this type of farm study; also, this data was taken from all areas of the county, and it is based on averages. Averages are very dangerous in the farm appraisal world and should be used with caution.
Farmland Prices | 2015
Mixed Results
2014 vs 2015 sales, by land type and county. Based on limited data and averages.
Hancock County, IL
Lewis County, MO
Highly Tillable
Stable
Stable
Less Tillable
Up
Down Slightly
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
Why Tillable Farms Held Steady
As for the reason for the highly tillable farm tracts being stable in both Missouri and Illinois, this may be because of commodity prices. Farmers are waiting to see what prices are going to do before investing large amounts of cash in new farms. On the other hand, the reasons for the increase and/or decrease in less open farm tracts are unknown exactly. There are many different speculations as to why the farming market changes over time and between states, and frankly this newsletter would not be long enough to explain every aspect. All of these points could be debated for hours.
A Stable Farm Market
In conclusion, I have not seen a large change in the farm real estate market in our area. Sure there are sales of farm properties that appear to be below market, and some that are at the upper end of the market, but overall, the farm market appears to be stable, despite the significant drop in the stock market and commodity prices. It appears that the farm real estate market is still being propped up by the low interest rates and the lack of a better investment. Where else can a person get a decent return on their investment and have a tangible asset that doesn’t depreciate? Land and farms have always been a good investment, when held for a long period of time, and it appears to still be a good investment. Mark Twain said it best, “Buy land, they’re not making it anymore.”
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
