CHICAGO Jan 15 Prices of top quality farm land
in the northern U.S. Midwest and Plains stayed firm in 2013, but
there were clear signs the market for average quality crop and
grazing land was leveling off, a lending unit of the
government-linked Farm Credit System said on Wednesday.
"After years of a steady rise led by lower than average U.S.
yields, strong domestic and international demand for
commodities, low interest rates and solid profit margins, we're
seeing the rate of price increases leveling off for farmland in
some areas we serve," said Mark Jensen, senior vice president at
Farm Credit Services of America, an Omaha-based FCS subsidiary
and a leading lender to farmers and ranchers in Iowa, Nebraska,
South Dakota and Wyoming.
Jensen said the bank's review of 3,500 farm land
transactions in 2013 in its four states and its annual review of
65 "benchmark" farms tracked for 30 years, "suggest the market
for farmland is leveling off and in some areas softening."
In top corn and soybean producer Iowa, benchmark farm land
values finished up 3.4 percent for calendar 2013. But that was
after falling 2.8 percent in the last six months of the year,
In addition, Iowa land prices fell 3.3 percent in the fourth
quarter compared with the third quarter. Over the last five
years, Iowa farm land prices were up 98.3 percent and over the
last 10 years up 282.1 percent, based on the bank's study of 21
Iowa benchmark farms.
In Nebraska, another top corn and wheat producer, farmland
prices finished up 8 percent for calendar 2013, but were up just
0.7 percent in the last six months, based on 19 benchmark farms.
In South Dakota, a rising corn producer, farmland prices rose
17.6 percent for the full year, but just 7.2 percent in the last
six months, Jensen said, based on tracking of 23 benchmark
Jensen said the bank's analysis of more than 3,500 farmland
transactions in 2013 showed that buyers were clearly adjusting
to lower grain prices after the record U.S. harvest. Those
prices will reduce the record profit margins experienced the
past few years.
"Even though the number of public land auctions in 2013 was
down 25 to 30 percent compared to 2012, auctions were often
well-attended with multiple bidders," Jensen said. "The number
of auction 'no sales' in Iowa was 6.7 percent in 2013, an
increase from 3 percent in 2012. Some sellers may have expected
higher prices than the auction high bid. Local farmers continued
to make most of the purchases."
The Farm Credit System and its subsidiaries handle more than
half of all lending to farmers in the United States, with the
Omaha unit alone holding more than $20 billion of loan assets.
Jensen said the bank's analysis suggest most farmers are
positioned to weather a moderate downturn in land prices.
"Since 2008, FCS America has used a risk management strategy
that includes a cap per acre on the amount of money we'll loan
for land purchases," Jensen said.
"We've been using a long-term sustainable value approach to
projecting repayment and lending levels based on corn prices
closer to $4.50 per bushel versus the prices of $7 or more that
some farmers were receiving in 2012.
"Their balance sheets and working capital levels are
generally in a position of strength, and they have put a
significant amount of equity into land purchases," he added.