Weak commodity prices. Concerns about falling farm income. Unsettled world grain markets. Uncertainty all around.
It’s my favorite kind of market. The kind where the marketplace presents challenges and those of us who market farmland have to earn our keep.
When a job is easy, people get the idea that anybody can do it. And there have been times during the past few years when it seemed like anybody’s housecat could sell farmland at auction. It’s understandable. Times have been good, and demand for farmland has been strong in all quarters. Farm profits were up, commodity prices were strong, and land buyers were plentiful.
Now? Not so much. Buyers are fewer in number, less eager, and more picky. And they’re increasingly nervous about the mixed signals they’re getting from the market.
The numbers themselves aren’t that bad, but they’re not what they were a year or two ago. Creighton University’s Rural Mainstreet Economy index published in the last few days found that its farmland index was 43 – its weakest reading since October 2009. (Creighton uses a 100-point scale, and anything over 50 is considered positive.) That’s down from a December reading of 47. To get its reading, Creighton surveys 199 bank executives in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.
We get a more positive note from the NCRIEF Farmland Index, which still showed a total fourth-quarter return of 9.26% on 546 investment-grade farm properties throughout the United States. Of that, 5.02% of the increase was appreciation. Farmland owners on the whole are still doing well.
The always-useful Iowa State survey on reported land values in Iowa give us a useful glimpse into the data. While prices were up 5.1 percent in 2013, that increase pales compared to the 32.5% and 23.7% reported by Iowa State in the previous two years.
It all translates into a more challenging marketplace. Not necessarily a bad one. Just one in which sellers will have to do a better job of marketing their farms.
That means providing better information on the property. More details about the soils, drainage, historical productivity. It means reaching out further for prospective buyers – not just local farmers, but regional and national investors. This plays to our strength, because Murray Wise Associates is known and respected among farmers and farmland investors of all sizes throughout the United States. We can reach prospective bidders that many companies can’t.
It also means putting more into the marketing itself, with higher quality brochures and more advertising. Yes, it costs a little more, but it’s worth it to get the best price possible for your land.
The way I look at it, the tougher the farmland market is, the more important it is to have serious marketing professionals in your corner.