Last year, there were few retirements or land sales in our area. Early indications this year show times may be changing.
There have already been two retirements (that I know of) within just a few miles. I can certainly understand. Farmers have been waiting for several years for grain prices to turn the corner. Now it appears we are looking at another year like the last ones. I wonder how many more are thinking about hanging it up.
Monday night was the first fall/winter land auction in our area. The auction had 90 acres, mostly tillable, which sold for $8,500 per acre. More were there to watch than to bid. I estimate there were 40-50 attendees, maybe a dozen who registered to bid. In the end, there were only two bidders.
A farm less than a mile away sold at auction in early 2015 for just under $11,000. That shows approximately 20% retracement in land values. The county north of us has had several ‘no sales’ at public auction.
What about land rents?
The next question is what is going to happen with land rent. At this moment, I can’t tell you. Most of my meetings with landlords happen over the winter months. I’ve heard some mild reductions the last couple years, but there are some rents that definitely have to come down.
When comparing to surveys, our area has been on the high side of rents. Landowners are still getting a good return, especially when compared to bank rates. Producers need the opportunity to gain a return as well. We all know the investment to farm is great.
Unfortunately, it appears that some input prices may be headed up. Diesel fuel and propane are higher than we’ve been used to. I’m told phosphates are going to head upwards as well. Let’s not forget chemicals. Those are going up as well. I’m told many of the generics come from China where manufacturing regulations have been ratcheted up, leading to higher production costs.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.