MWA: Murray Wise Associates

Midwest Farmland Market Remains Firm

 The last six to eight months have been a bit of a rollercoaster for Midwest row crops with rising interest rates, softening commodity prices and overall uncertainty in the market due to trade relations. Despite these headwinds, the demand for farmland has remained strong this winter, and prices have maintained stability.

There are a few factors keeping the market buoyed:

  1. The volume of sales continues to remain extremely low for high quality land. The majority of sales seem to be cases where trusts and estates are being settled, not situations where owners are actively looking to put their land on the market.
  2. In 2018, as in previous years, many growers produced outstanding corn and soybean yields. These robust yields helped counterbalance softer prices and allowed many farmers to remain profitable.The investor-buyer group provides a pricing floor for most sales. Local farmers continue to be the group that drives the market in most areas (in some states, farmers account for over 70% of purchases). However, in instances where financial strength in a region may be weaker, and consequently farmland prices are suppressed, there is a good chance investor-buyers will see an opportunity to add a farm to their portfolio at an acceptable return.

As we move into 2019, the key items to keep an eye on will be interest rate increases, crop yields, commodity prices and trade negotiations — the latter two being closely linked. Any one of these variables moving too far from the expected norm could take land prices along for the ride.