July 9, 2015
Canadian farmland
rose 13.3% in 2014,
according to Stats
Canada. The agency
says farm equity
increased in every
province except in
Newfoundland and
Labrador-Nova Scotia.
This figure is similar
to the 14.3% gain
reported earlier by
the huge lender Farm
Credit Canada. The
agency says total farm
assets rose by 10.4%
while the debt-to-asset
ratio declined to
15.0%, its lowest level
since 1997.
27 states file suit
over WOTUS. The
suit was filed in the
U.S. District Court for
the district of North
Dakota. They argue
the new rule defining
waters of the U.S.
(WOTUS) by the EPA
and U.S. Army Corps
of Engineers violates
the Clean Water Act,
the National Environmental Policy Act and
the U.S. Constitution.
The states are asking
to have the rule vacated as it takes away
rights specifically
granted to the states
that have been repeatedly affirmed by both
the Congress and federal courts.
See you next week
at Leading Edge in
West Des Moines,
Iowa. For more go to:
profarmer.com and
click on the Pro Farmer
Services tab or call
1-888-698-0487.
Powerful Insight for LandOwners
Vol. 36 • Iss. 13
Midyear Outlook: Steady to Possibly Lower
Steady with the likely chance for weakness is
our “weather forecast” for the farmland market
the second half of the year. Other land market
observers and participants are also making that
call — as you’ll read inside.
Making a forecast for the second half of the
year is more cloudy than usual this year. That’s
because of the intense rains that have impacted
large areas of the Corn Belt and Plains. If rain
continues and crops are negatively impacted like
they were in 1993, prices will rise along with
farmer attitudes. Farmland values would likely
remain steady in that case and possibly edge
higher. But normal yields in 2015 would likely
pressure land values again in 2016 into 2018.
We also believe it is important the increased
interest by non-farm investors is being put into
actual execution. (See stories below.) This new
source of demand won’t stem a wide-scale decline
in values by itself, but it can certainly slow the
rate of decrease. And it can help the market find
a low at a higher level than otherwise.
Third Farmland Investment Fund to Go Public
American Farmland Company, a New Yorkbased Real Estate Investment Trust (REIT),
filed June 26 with the Securities and Exchange
Commission (SEC) to raise up to $100 million in
an initial public offering (IPO), reports NASDAQ.
The firm would be the third farmland-focused
REIT to become publicly traded.
The first was Gladstone Land Corporation,
which began trading on the NASDAQ in January
2013. The firm is part of the Gladstone Companies
investment fund firm headquartered in McLean,
Virginia. The REIT purchases fresh-produce
farms rather than wheat and row-crop farms
growing corn, soybeans and cotton. When it
launched its IPO, its farmland purchases were
located in California, Oregon and Arizona.
In its first-quarter 2015 results, the firm listed
ownership of 34 farms, consisting of 8,789 acres
in five states. On June 22, Gladstone announced
it had concluded two purchase agreements to
acquire five farms, consisting of 3,519 acres in
California and Florida. It also indicated it was
evaluating the purchase of six farms, consisting
of 5,476 acres in Colorado, Florida, Georgia and
Nebraska for $23 million.
On June 29, the firm announced it had concluded the purchase of 2,668 acres in Florida.
The second REIT to launch an IPO was
Farmland Partners, Inc., of Denver, Colorado. It
owned 38 farms comprising 7,300 acres at the
time of its IPO on the New York Stock Exchange
in April 2014. It now has 120 farms consisting of
71,188 acres located in Illinois, Nebraska,
Colorado, Kansas, Arkansas, Louisiana,
Mississippi, South Carolina, North Carolina,
Virginia and Michigan. Its most recent purchase, announced June 29, is a 125-acre Michigan
blueberry farm priced at $1.2 million. Prior to
that purchase, the firm’s portfolio consisted
strictly of commodity row-crop corn, soybean,
wheat, rice, cotton, sunflower and milo farms.
American Farmland Company is part of
Optima Fund Management, headquartered in
New York City. The firm reports it owns 17
farms consisting of 15,378 acres. It states the
farms were valued at $171.1 million as of March
31. The 17 farms produce 21 crop varieties ranging from mature permanent, specialty/vegetable
crops to commodity row crops. The farms are
located in Alabama, Arkansas, California,
Florida, Georgia and Illinois.
New Private Fund to Buy Farmland
A new private investment fund will soon be
active in the farmland market. It is Homestead
Capital with offices in Council Bluffs, Iowa, and
San Francisco, California.
The fund recently announced it had closed its
inaugural fund titled Homestead Capital USA
Farmland Fund 1 at $173 million. The fund’s
stated objective is to acquire properties in the
Mountain West, Delta, Midwest and Pacific
region. It also announced it had already invested
$60 million of the original fund in the four regions
through eight projects.
The firm’s management team combines investment managers and attorneys with experience at
investment bankers such as JP Morgan and
Goldman Sachs & Co. with a who’s who of past
presidents of the American Society of Farm
Managers and Rural Appraisers.
Wisconsin Ag Land Rises 5%
The value of Wisconsin agricultural
Wisconsion Statewide Average Value
$/a
$3,935
land rose 5% in 2014, according to data
reported to the state and analyzed by
A. J. Brannstrom of the University of
Wisconsin
Center
for
Dair y
Profitability.
The average price of agricultural
land sold in 2014 reached $3,935 an
acre, he reports. In addition, he notes
the total acres sold declined 5% and
the number of sales decreased 8%. Key
driving factors behind the year’s gain
were strong dairy prices and low interest rates, he observes.
Brannstrom analyzed data obtained
from the state Department of Revenue.
Transfer return records are collected
A. J. Brannstrom, University of Wisconsin Center for Dairy Profitability
from each real estate title transfer. He
looked only at sales of bare land
between non-related parties sold with warranty deeds $2,374; -8.4%
or land contracts. All parcels were between 35 and
2,000 acres and were assessed for agricultural use at
$2,672; +18.5%
the time of sale.
Transactions with sale values less than $400 an acre
and more than $17,000 per acre were excluded. He
$2,799; -6.5%
assumes such properties are not used for agricultural
purposes. Sellers who retained property rights were
also excluded as were parcels with reported water
frontage. In addition, properties in cities or villages
were excluded.
$2,969; +4.0%
After sorting land transactions for study according
to his criteria, he found more than 7,000 transfer
$5,876; +13.0%
$3,744; +10.9%
returns covering 2009 to 2014 to use in his study.
All sale prices are based on weighted averages. The
$5,882; -7.3%
weighted average tends to reduce the influence of
sales with unusually high or low sale prices, he notes. $3,739; +5.8%
Weighted averages are computed by first summing
$5,662; +7.6%
NASS districts
the dollars paid for all sales and the total acres sold
and then dividing the totals.
He organized his data according to the nine districts districts saw declines in average sale price. The west cenused by USDA’s National Agricultural Statistics Service. tral district saw the most acreage sold, while the northThe map at right shows the weighted average district east sold the fewest acres, he says.
Brannstrom notes the percentage of farmland purprice and the percentage change from the previous year.
East-Central Wisconsin saw the fastest percentage chased with cash remains high at about 38% in 2014. That
increase in land values over the past six years, he notes. compares to a high of 48.2% in 2012, and a low of 36.6% in
This is also the fastest growing milk production region in 2011. Even at 36.6% in 2011, that is a testament to the
the state. The average price per acre for bare land was strong financial position many farmer buyers enjoyed in
nearly the same in the southeast, east-central and south- recent years. Individuals comprised 70% of sellers in 2014,
central districts. The southwest, northeast and central while LLCs, trusts, etc. were 26%.
LandOwner is published twice a month. Copyright 2015 by Professional Farmers of America, Inc., 6612 Chancellor Drive, Cedar Falls, Iowa 50613-9985
Periodicals postage paid at Cedar Falls, Iowa. Postmaster: Send address changes to: LandOwner, 102 Mackinlay Dr., Webster City, Iowa 50595
Senior Vice President, Chuck Roth • Editor, Mike Walsten • Publisher, Chip Flory • Markets Editor, Brian Grete
Editorial Phone: 319-277-1278 • E-mail: landowner@profarmer.com • Editorial correspondence: 6612 Chanellor Dr., Suite 300, Cedar Falls, IA 50613
ISSN number: 1548-2901 • Subscription services phone: 1-800-772-0023 • Subscription: $249 per year
LANDOWNER 2 / July 9, 2015
FNC: Harvest Incomes Key to Land Values Going Forward
While current land values have generally trended lower
this past year, results of farm and ranch income at year’s
end could shift land market dynamics, according to
Farmers National Company (FNC), Omaha, Nebraska.
“Harvest results of 2015 will make it a pivotal year, which
could impact the land market for several years,” says
Randy Dickhut, AFM, vice president of real estate operations. “Farm and ranch income will drive the direction. A
great deal could happen between now and November.”
Dickhut says margin compression is occurring as a result
of lower grain prices and steady input costs. He believes
higher grain prices this fall would stabilize land values;
however, lower prices could push values downward.
While farm and ranch profits are forecast to be lower in
2015, which will impact cash flows negatively, agriculture
overall remains financially strong due to past profits.
Operators working to shore up financial stress due to
tight cash flow could lead to a boost in sales as property
owners work to right balance sheets, he says.
Location and quality of land continue to be the main price
drivers for individual tracts. The stability of this market is
maintained by a lower supply of land for sale, contrasted
with a continued demand for quality properties.
FNC statistics show the volume of properties for sale is
down 40% over the past six months, as compared to the
past two years. “The current level of available land is having a real impact on farm and ranch operations looking to
expand,” he states. “Demand is still good for quality land.
The market just isn’t as aggressive as in the past few
years, so values are drifting sideways to lower.”
High-Quality Land Values by State
Average sale price per acre
While land values are down nearly 10% in most areas,
price softening is happening at different rates in each
region. For example, sales in the Northwest have been
brisk, as the California drought is driving activity north.
The Southern Delta region hasn’t seen much decline,
while parts of the Midwest are experiencing significant
drops in value.
While current buyers are predominantly active farmers
and ranchers adding land to their operations, interest
from investment funds and individuals is on the rise. In
addition, generational land transfers continue to play a
large role in market movements, as many inheriting land
choose to sell.
“With the softening of land values, some investors are
looking at this as an opportune time to buy,” he says.
“Land is considered a low-risk long-term investment, so
we will see these types of buyers jumping into the land
market more and more over the next several years.”
Demand for cropland and grazing land from producers
remains good, but buyers are being more realistic in what
they will pay given lower grain prices. Land professionals
are recommending sellers be more realistic in evaluating
the quality of their land and the expected selling price in
order to have a successful sale. Regional FNC comments:
Kansas and Oklahoma: Values remain historically
strong and quality land is still in high demand but probably 10% to 15% lower than at its peak. High-quality land will
meet with continued excellent demand and historically
strong values. Marginal quality land will struggle to
achieve the same values it experienced the past four or
five years and will meet with fewer interested buyers.
Iowa and Minnesota: Low commodity prices have
finally started to affect land values in Iowa and Minnesota.
In areas where fewer livestock is being raised, land values have definitely softened. Specific areas that have seen
outbreaks of the avian flu will definitely see a downward
trend, as owners have had to destroy more than 30 million birds.
Dakotas and western Minnesota: While prices are
down 10% to 20% from a couple of years ago, land prices
are still excellent when looking back over the past 10
years. Sellers can expect to see notable buyer interest in
their land, as long as it is priced right. There is a trend
toward more private listings versus auctions as compared
to a year ago.
Eastern Corn Belt: Activity throughout this region is
seeing a calming of sales during the first half of 2015, with
values trending slightly downward. Based on current market factors, this trend is likely to continue throughout the
summer months and into fall. A tight supply of farmland
has helped reduce the negative shift and continue to support values.
LANDOWNER 3 / July 9, 2015
Iowa: Fayette County —
June 10: 409 acres northeast
and north of West Union. Tract
1: 139 acres; 136 acres tillable;
CSR2 68.9; CSR 68.7 (64.3
county average); swine farrowto-finish buildings; $10,000 per
acre. Tract 2: 69 acres; 57 acres
tillable; CSR2 78.4; CSR 78.3;
$11,625 per acre. Tract 3: 432
acres; all tillable; CSR2 69.2;
CSR 66.6; $9,500 per acre.
Tract 4: 34 acres; 30 acres tillable; CSR2 53.0; CSR 56.3;
$6,400 per acre. Tract 5: 119
acres; 102 acres tillable; CSR2
64; CSR 68.4; $5,800 per acre.
Tract 6: 7 acres; wooded;
$65,000 total. Cal E. Wilson,
Hertz Real Estate Services,
Waterloo, 319-234-1949.
Kentucky: Christian Co. —
June 6: 72 acres 4 miles west
of Hopkinsville; barns; $8,011
per acre. James R. Cash,
Auctioneer & Real Estate Broker,
Fancy Farm, 270-623-8466.
Kansas: Rawlins County —
June 3: 320 acres 12 miles
north of Gem; 251 acres dryland cropland; 70 acres grass;
$2,017 per acre. Donald
Hazlett, Farm & Ranch Realty,
Inc., Colby, 800-247-7863.
Minnesota: Lac Qui Parle
County — May 7: 120 acres
northwest of Montevideo; 107
acres tillable; CPI 82.1; $5,800
per acre. Brian Fernholz, Heller
Group, 1 Stop Realty, Inc.,
Madison, 320-226-4504.
Oklahoma: Garfield Co. —
May 28: 154 acres northeast of
Waukomis; 111 acres cropland;
$325,000 total or about
$2,110 per acre. Kim Allen,
Wiggins Auctioneers, LLC,
Enid, 580-541-3180.
Indiana: Delaware Co. —
May 14: 84 acres 1.5 miles
northeast of Selma; 61 acres
tillable; corn PI 147.7; 22 acres
wooded; $470,000 total or
about $5,595 per acre. Chris
Peacock, Halderman Real
Estate Services, Winchester,
765-546-0592.
LANDOWNER 4 / July 9, 2015
$
Recent sales
reported to...
Here’s a listing of
recent sales reported to us by real estate brokers and auctioneers
across the country. If you have recent sales you’d like to share, call us at 319277-1278 or e-mail us at landowner@profarmer.com.
Illinois: McLean County — June 26: 38 acres south of Cooksville; nearly
all tillable; PI 136.1 (147 maximum per Illinois Bulletin 811); $9,600 per acre.
Roy Bracey, AFM, Farmers National Company, Chenoa, 815-945-7722.
Iowa: Clay County — June 26: 115 acres 2 miles south of Royal; 114 acres
tillable; CSR2 96.2; CSR 80.7 (67.7 county average); $11,300 per acre. Jon
Hjelm, ALC, The Acre Co., Spencer, 712-262-3529.
Indiana: Porter County — June 25: 34 acres adjacent to Portage; 32 acres
tillable; corn PI 150.5; $150,000 total or about $4,545 per acre. Julie
Matthys, Halderman Real Estate Services, New Carlisle, 574-310-5189.
Iowa: Van Buren County — June 24: 71 acres northeast of Keosauqua.
Tract 1: 36 acres; 32.5 acres tillable; CSR2 66.1; CSR 58.9 (42.9 county average);
$7,250 per acre. Tract 2: 35 acres; 4.5 acres tillable currently in pasture;
remainder is hardwood timber; $3,700 per acre. Sullivan Auctioneers, Inc.,
Hamilton, Ill., 217-847-2160.
Illinois: Woodford County — June 19: 132 acres west edge of El Paso.
Tract 1: 54 acres; all tillable; PI 141.8 (maximum 147); $13,000 per acre. Tract
2: 78 acres; all tillable; PI 142.1; $13,000 per acre. Two different buyers.
Sullivan Auctioneers, Inc., Hamilton, 217-847-2160.
Illinois: McLean County — June 18: 159 acres 2 miles southeast of
Stanford; 158 acres tillable; PI 138.5 (147 maximum); $10,685 per acre.
Offered as two tracts; purchased as single unit. Dan Patten, Soy Capital Ag
Services, Bloomington, 309-665-0962.
Nebraska: Lancaster County — June 17: 149 acres 1 mile northeast of
Princeton; 147 acres cropland; irrigated with 10-tower unit; power unit not
included; SRPG 56.0; $8,000 per acre. Jerry Wiebusch, Farmers National
Company, Lincoln, 402-421-1933.
Iowa: Greene County — June 17: 148 acres 1 mile west of Churdan; nearly
all tillable; CSR2 77.1; CSR 73.8 (76.4 county average); $8,100 per acre. Mike
Green; Green Real Estate & Auction Co., Sac City, 712-662-4442.
Illinois: Sangamon County — June 16: 159 acres south of Loami: 154 acres
tillable; OPCY 161.3; $14,000 per acre. Luke Lee Gaule Auctioneers,
Springfield, 217-523-7272.
Kansas: Rush County — June 16: 160 acres 2 miles west of Timken; 90
acres cropland with 35 acres irrigated; fenced pasture; farmstead; $2,180 per
acre. Carr Auction & Real Estate, Inc., Larned, 800-503-2277.
Iowa: Grundy County — June 11: 141 acres south of Dike; all tillable; CSR2
68.9; CSR 74.3 (84.7 county average); $7,350 per acre. Buyer receives secondhalf lease payment of $20,413.50 Sept. 1; Vince Johnson, Iowa Land Sales &
Farm Management, Montezuma, 641-623-5263.
Outlook Provided by Pro Farmer
Economy
Unemployment falling as economy strengthens
U.S. Monthly Unemployment Rate
The unemployment rate has been in
steady decline since the 2009 peak.
Fundamental trends
Unemployment: The U.S. monthly rate of unemployment bottomed in 2007 for a business-cycle low
and then surged into September 2009. Since 2009,
the unemployment rate declined from 10.0% to 5.4%
as the economy recovers from the recession low.
Nominal GDP per capita has risen to an all-time
high as unemployment has declined. The Industrial
Wheat
Production Index that dates back to the 1920s and is
followed by the Fed made a record high this year.
Housing is also important for assessing strength of
the U.S. economy. Housing starts as of May were still
well below the pre-recession high, but in an uptrend.
The outlook is for the rate of unemployment to work
lower into next year alongside a growing economy.
Demand remains a concern for wheat
Weekly SRW Wheat Futures
The long-term downtrend remains
intact. A push above that level would
have bulls targeting $6.77 and then $7.44.
$7.44
$6.77
$5.72 1/4
The pivotal $5.72 1/4 level is support again. A close
below that level would signal a short-term top is
in place. That would open the downside $4.60 3/4.
$4.60 3/4
Fundamental trends
SRW: USDA’s Quarterly Grain Stocks Report
showed all wheat stocks at 753 million bu. compared
to trader expectations of 718 million bushels. The
data caused traders to take profits the day after the
report on thoughts that supplies are adequate and
the U.S. lacks competitiveness globally.
HRS: USDA pegged spring wheat acres at 13.05 million compared to March intentions of 12.969 million
acres. Farmers in the Northern Plains found corn to be
less competitive considering weather-related risk and
low prices early this year. Meanwhile, Canadian spring
wheat plantings were lower than planned in March.
LANDOWNER July 9, 2015 / Outlook page 1
Corn
Corn due for a pullback after the strong June rally Weekly Corn Futures
Futures blew through the long-term downtrend
and flat resistance at $4.06 1/4 to signal at least a
short-term low. There isn’t much chart resistance
until $5.22 3/4, so psychological levels at $4.50,
$4.75 and $5.00 are bulls’ next targets.
$5.22 3/4
$4.06 1/4
A close below $4.06 1/4 would point the contract back to the long-term downtrend.
Fundamental trends
Corn: USDA’s Acreage Report surprised traders
with lower-than-expected planted corn acres. The
Quarterly Grain Stocks Report showed corn
stocks were also lower than expected. This caused
a swift round of buying that greatly extended the
prior week’s sharp rally. At the CME Group, agricultural futures hit a new record at 2.874 million
Soybeans
contracts traded on June 30, the day of the reports.
Most of the late-June rally was on lower open
interest, which suggests short-covering rather
than fresh buyer interest for futures. With weather forecasts offering less above-normal precip and
an overbought market, a correction in prices is
likely near-term.
Beans rally amid crop scare, but now face tough resistance
Weekly Soybean Futures
Bulls’ next upside target is $10.94 1/4. If that tough
resistance is cleared, they will aim for $11.86 1/2.
$10.94 1/4
$11.86 1/2
The long-term downtrend is now support, along with the
2014 low at $9.04. A drop below those levels would point
beans toward a band of support from $8.75 to $7.75.
Fundamental trends
Beans: The past three weeks, the July/November
spread weakened 12¢ to near a low made in April.
This indicates limited interest by bulls in old-crop,
while seller interest was restrained in new-crop
futures. It also suggests limited farmer interest in
hedging new-crop. With crop conditions eroding
due to adverse weather, traders favored short-covLANDOWNER July 9, 2015 / Outlook page 2
$9.04
ering. But with large global supplies and the U.S.
2015 crop likely to be sizable, traders and farmers
need to keep an eye on rising support levels given
the overbought status of the market. Brazilian
futures are also strong, but a weekly close lower
would likely mean they have returned to making
soybean sales for export.