farm land spreadsheets

Why is demand for farm land down?

Farmers are now bidding based on profitability, not emotions.

In the last month or so, it is evident farmers are putting aside emotions and are once again bidding based on the merits of profitability.

This week was the latest example. At auction, land comparable to a farm which sold for $12,000 an acre last December sold for just under $8,000. One could still argue $8,000 an acre is not profitable, but it’s a whole lot closer than $12,000! That’s a whopping 33% reduction. There have been several other land auctions with similar results, some parcels hardly even finding a bid.

Much of the last week has been spent updating the worksheets with 2017 prices for seed, fertilizer, and other crop inputs. (Photo: MarcoMarchi/Thinkstock)

The same is beginning to happen as land rents are negotiated. With red ink situations, farmers have reached the end of the line with excessively priced land rent contracts. Several ag professionals have told me the same thing: Real life business policies of dropping the bottom X percent of land, leases that underperform financially, is happening in the farm offices. Most the time these are also the landlord-tenant situations which teeter every year. Operations are tired of the uncertainty.

The common argument from land owners is this: ‘You guys made good money a few years ago, now you can give it back.’ This just isn’t right. When we were making good money (a rare era in farming) land rents went up, and much of the profits were spent on updates to equipment and facilities. Land rents are just now starting to retreat. Also remember, it was the ag economy that shined during the last recession, keeping the general economy from even greater disaster.

Few exceptions

To be honest, there are a few exceptions on larger tracts where farmers have still gotten carried away. But I can’t go out there and take profits from one rented farm to pay for another. My philosophy remains each farm must stand on its own merits.

Much of the last week has been spent updating the worksheets with 2017 prices for seed, fertilizer, and other crop inputs. I am working through crop rotations and beginning to place seed selections on farms. With better soybean prices so far this fall, I thought we may plant more beans, but the numbers are still quite tight.

Today we anxiously wait to see how the government weighs in on the report, and which way markets will move.


The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

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