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Demand for U.S. farmland has jumped to a five-year high, spurred on by a profitable grain market and a boost in buyer interest from both farm operators and land investors. While demand rose sharply during the last quarter of 2010, the supply of available farmland fell to historically low levels.
Iowa and Minnesota
Prices for quality land are at levels that are high or higher than they have ever been in most of the North Central Region including Iowa, Missouri, Minnesota, South Dakota and North Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. In many areas of Iowa, top quality land is selling in the $8,000 to $9,000 per acre range.
"I would say in some areas of Iowa and Minnesota land values may have jumped as much as $1,000 an acre in the last 60 days, with prices at $6,200 per acre in Minnesota," said Kain. "Demand remains very strong in all areas as there is a limited supply of properties for sale."
Kain added that increased interest from investors is pushing farmland prices upward. However, he said that the majority of the sales are still going to local farmers.
"Land values in this region are likely to continue an upward trend," said Kain. "Commodity prices definitely point upward, but these trends can quickly change as world issues change."
Colorado, Kansas, South Dakota, Central/Western Nebraska and Wyoming
The western region of the farm belt is currently seeing more of a demand for quality land than ever before, reported JD Maxson, area sales manager for Farmers National Company in Colorado, Kansas, South Dakota, central/western Nebraska and Wyoming. "With the volatility of the stock market and CD rates historically low, I'm not looking for a farmland market correction any time soon," Maxson said. "In my opinion, investors will continue to look at land as a hedge against inflation and a sound investment tool with a proven rate of return. Our clients' lack of confidence in the financial markets, along with the current CD and interest rates, is reducing motivation to put retirement funds on deposit."
Buyer demand for high quality property continues to increase as sellers' inventory continues to shrink. According to Maxson, recent land auctions have been well attended with active bidding at 10-15 percent above market value. Local owner/operators are winning the bulk of the bidding.
High commodity prices and continued global demand for protein are currently driving the market, according to Maxson. "Land prices show a definite variation with location and quality as key indicators," he said.
Sale prices of irrigated cropland throughout central, eastern and western Nebraska vary greatly depending on access, location and water, according to Maxson. For example, wet pivot acres range from $2,500 per acre in western Nebraska to $6,000 - $6,500 per acre in central and east central Nebraska. At a recent land auction property sold at more than $8,000 per acre.
Looking at western Nebraska, prices range from $500 - $650 per acre for average cropland to $1,850 per acre for land in the east river area of South Dakota, with irrigated land in southeastern South Dakota averaging $6,500 per acre, said Maxson.