Good quality cropland sold well at auctions during the pre-harvest sale season. The old real estate adage that “quality sells” is holding true in the land market. The higher quality cropland that comes up for sale at auction or through a private treaty listing is in demand. The current strength in land values is in contrast to a few months ago when it was thought that land values would be steady at best due to lower commodity prices and challenges to farm incomes.
Leading into harvest this year, agriculture endured months of supply chain challenges especially in the meat industry, lower ethanol demand, much lower commodity prices, reduced yield prospects from wind and dryness, and uncertain government support. All of this was weighing on the minds of land buyers and sellers as they were evaluating their decisions to sell or buy land. But one important factor surfaced in March that continues today and which is the presence of an increased number of individuals who want to own farmland for the first time or add to their ag land holdings. This lends to an increase in the demand for good cropland and support of land prices.
The number of land auctions and sales normally picks up in late summer and early fall prior to harvest in the Midwest. That was again true this year but the number of sales was not as large as some years in the past. The quantity of ag land for sale remains lower than other times which continues to be a contributing factor to steady land values. Farmer demand for good cropland continues as well as the boost in commodity prices and the assurance of the most recent round of government payments brought some optimism into buying decisions.
There are a number of reasons for the recent strength in land prices as investors look for a safe long-term investment and producers add to their land base when that once in a life time farm comes up for sale. Traditionally, more farms come up for sale during the period after harvest till the end of the year. The land market will be closely watching the number of sales and the price levels as we move into 2021 and a different set of factors surrounding both the ag and general economies.