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Farmland Prices and Sales Normalize


Values have largely held steady through the first half of the year for the 71 benchmark farms FCSAmerica and Frontier Farm Credit monitor in Iowa, eastern Kansas, Nebraska, South Dakota and Wyoming ... commodity values broke, then real estate values ...


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The pace of farmland-value drops has slowed in several areas, according to a recent report from Farm Credit Services of America (FCSAmerica)Values have largely held steady through the first half of the year for the 71 benchmark farms FCSAmerica and Frontier Farm Credit monitor in Iowa, eastern Kansas, Nebraska, South Dakota and Wyoming. “The report confirmed what we’re hearing in the market,” says Mark Jensen, senior vice president and chief risk officer for FCSAmerica and Frontier Farm Credit“There aren’t as many sales compared to 2011-14The amount of sales in the market has returned, and in some areas is below, what would be more normal.”  Land quality and location are two key driving factors for prices. “For values, we are seeing everything all over the board and in between,” he says“You still see tracts selling for fairly high prices when compared to the adjustment we’ve seen in commodity pricesAt the same time, the data clearly indicates the average market value and sales volume is down from the historical highs.” Fewer Sales Across the five-state region, sales activity fell 21% in the first half of this year compared to the same period in 2016Lower-quality land is devaluing the most, while the value of average and above-average land is holding steady. FCSAmerica still has farmer-customers who are looking to buy land if it fits their operation, Jensen says, “though they are more cautious about what they are buying.” The data reflects that both grain prices and farmland values are stabilizingThat helps create less volatile farmer balance sheets. “But balance sheet equity doesn’t fix underlying cost and cash flow challenges,” Jensen says“Our customer conversations remain focused on cost management, marketing plans that align with cash flow and balance-sheet structure needed for optimal risk protectionFor farmers with balance sheets positioned to be sustainable at these grain-price levels, they might still buy a tract.” Will farmland values continue to decline in 2017 and beyond? “It depends on what commodity markets do,” Jensen explains“If you look at the 1980s, commodity values broke, then real estate values started to fall and then cash rents lagged behind valuesThat’s what we’ve been seeing since 2013We are hopeful the demand-supply equation is stabilizing and thus, so will commodity and real estate values.” Notable state trends include:   Land quality and location are two key driving factors for prices.

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