Minn. farm land prices moderatingBill Weber is owner and president of Jensen Management Inc., an appraisal company in the heart of Rock County a transition area across the divide into Iowa.
By: AP Member Exchange Feature By Mikkel Pates, The Jamestown Sun
LUVERNE, Minn. (AP) — Bill Weber is owner and president of Jensen Management Inc., an appraisal company in the heart of Rock County a transition area across the divide into Iowa.
Weber joined the company in 1976 when he was 20 years old, fresh out of business college. He had seen a lot of things — the tail end of the farm boom, the debt-credit crisis of the 1980s, the recovery in the 1990s,the boom effect of the ethanol age after 2000.
What does he make of today’s situation?
“I’m not sure at this stage what it is yet,” he said. “I don’t think anyone can tell you — a minor correction, or the start of something larger.”
Rock County is the farthest southwest county in the Minnesota — famously the only one of 87 counties in the state of 10,000 lakes that does not have a natural lake. It’s just across the border from Lyon County, Iowa, a transition point where Iowa Corn Belt farmland transitions into the southern Minnesota Corn Belt.
Corn, beans, cattle and hogs are everywhere.
Typical of those assessing the land value equation is Larry Leuthold of Hills.
He and his son, Collin, operate a 1,000-head custom feedlot just north of the border. They farm 400 acres and market their corn through the cattle to their custom feeding customers. All the Leutholds’ 2008 crop was locked in by their custom feeding customers at $6.20 per bushel.
“I’m happy — very thankful,” Leuthold said with humility. Since then, corn prices have dropped to about $3.50, but yields this year were excellent — 200 bushels per acre plus. Land values still are high, he said. “I’d say in the $6,000- to $7,000-an-acre range, but none has sold locally. There’s talk about values going down a little bit.”
Many Rock County farms are in the 2,000-acre range, but there still are a lot of 1,000-acre farms and smaller ones that are heavily livestock-oriented.
The county’s Blue Mounds name refers to a quartzite outcropping, running underground at varying depths to Jasper, to a functioning quarry. Off to the side of the ridge is a 2,000-acre marsh basin — flat and mucky soil with varying quality. Farther east in the county, the soils are glaciated, with tighter heavier soils fairly high quality. Much of the land is tiled for drainage, but some of the systems are old, carrying more acres than the system was intended to handle.
Land values on this border definitely have an influence farther north — the start of a wavelike effect that can reach into land valuation in central Minnesota, South Dakota and beyond into the newer corn and soybean frontier in the Red River Valley.
Weber’s company works in appraisal, sales and management business for farmland roughly in a 20-county area, on both sides of the border.
For many years, land values in Rock County had bounced around in the $2,500- to $3,000-per-acre range. In 2005 and 2006, the prices reached into the $5,000-per-acre level.
Most farmers in this area own about half of the land that they farm.
“That depends on how you define ‘ownership,”’ Weber said. “Maybe you have a family rental situation where the land isn’t available on the open market. This can be father-son, grandpa-grandson or purely unrelated.”
The high water mark in Rock County probably was a 77-acre parcel that hit $7,800 per acre last winter. The tract is located about five miles southwest of Luverne, near the town of Beaver Creek.
Jensen Management handled that sale, which was held Feb. 16 at the Luverne Senior Center — a hot market on a very cold Saturday.
“We probably had 70 people in there,” Weber said. “There were four or five that went into the $6,000-per-acre level. As we’d gotten into the week prior to the sale, we were expecting it to hit $7,000 an acre, but we probably never expected it to get that close to $8,000.” (A related rural residence was sold separately at about $120,000 — close to the so-called “normal” at the time.)
Weber said it’s impossible to include all the factors that go into a sale like that one. The eventual buyer of the tract declined to be interviewed for this story. According to other stories, the buyer had lost some land that was taken via condemnation for a needed expansion of the Luverne city airport.
Other factors, of course, were the stunning price of corn at the time — $5, $6 and even $7 per bushel — and $15-plus beans.
Prices have come down since then. More recently, quarter of land sold south of Beaver Creek, at $7,125 an acre, so the price is moderating. A sale in Nobles County, just to the east, was $4,625 in October at public auction. Last April and May, similar ground sold for $5,100 to $5,400. A private treaty 80-acre tract sold for $5,500 in November.
“I’d say we’re seeing a 10 (percent) to 15 percent decline,” Weber said. “We’re seeing mixed results, depending on who’s interested and the quality of the property.”
Numerous factors come into play in this county’s land market.
“In southwest Rock County, we see some people bidding on land who were farmers or landowners who had development land on the outskirts of Sioux Falls, S.D.,” Weber said.
The Sioux Falls economy still is strong. Landowners took those dollars and reinvested in southwest Minnesota because their operations are close.
Weber said the state line is a definite psychological effect market.
“It tends to start happening down there before it takes off up here,” he said.
At the time of the high-water market sale, Lyon County already had had a half-dozen land sales in the $7,000 range. And the next county south of that is Sioux County, where sales in the $8,000 to even $10,000 range are not unheard of.
Why so expensive just a few miles south?
The most competitive areas in Sioux and Lyon counties are driven by “enormous demand” from local farm families, Weber said. The competition is especially fierce because little land ever sells there.
“Right or wrong, they play the old game of averaging things out over the whole operation, and they’ll pay what they need to pay to get it,” Weber said.
Judging farmland value is equal parts art, science and a good dash of sociology
Productivity is scientifically expressed through crop equivalency ratings numbers. The CER numbers are available through the soil survey, most prevalent used in tax assessment starting in the 1970s and early 1980s.
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