OMAHA, Neb. — Prices and demand for agricultural land in South Dakota have been on the rise since the 2020 harvest, according to a recent property sales report by a major Nebraska land management company.

A survey of recent sales by Farmers National Company indicated that land used for agricultural purposes has steadily risen in demand and price in the past six months.

The Omaha, Neb., company, founded in 1929, offers professional farm management, real estate sales and auctions as well as a range of agricultural services for landowners including oil and gas management, forest resource management, appraisals, insurance, consultations, hunting lease network, lake management and FNC Ag Stock.

The improved prices come as somewhat of a surprise. With the arrival of COVID-19 on the scene in 2020, the agricultural sector struggled with supply chain problems, distressed grain prices and other challenges brought on by the global pandemic.

But that eventually changed.

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“It wasn’t looking that optimistic as we progressed into that late summer and fall time frame,” Randy Dickhut, senior vice president of real estate operations at Farmers National Company, told the Mitchell Republic. “But grain prices were starting to perk up, and another big factor was the additional government payments that came to grain and livestock producers. That put money in their pockets.”

A farmer unloads his corn into a trailer in Aurora County. (Matt Gade / Republic)
A farmer unloads his corn into a trailer in Aurora County. (Matt Gade / Republic)

The influx of funds and improving conditions brought about a resurgence of interest in owning land, which is always of use for those who want to grow crops or graze cattle. But the pandemic also spurred another type of buyer to seek out land that may not have otherwise had interest. Urban buyers suddenly became much more interested in agricultural land as an investment, Dickhut said.

“(The pandemic) brought on an increased interest in owning land. It started in urban areas with people who wanted to own a spot in the country or an acreage. That expanded and we got calls from individuals who have never owned farmland. They were interested in it because of food and ag issues and the importance of the food supply chain,” Dickhut said. “They thought this is a good place to invest and I want to be part of it.”

South Dakota, North Dakota, Minnesota

The company issued a report covering 15 different states, including a combined report for South Dakota, North Dakota and Minnesota. Brian Mohr, an area sales manager for Farmers National Company, said auctions and listings for land have been up.

“Prices for top quality cropland sold through our auctions and listings have increased significantly since harvest. Demand for good farmland has definitely increased,” Mohr said in a statement.

Mohr noted the Northern Plains region specifically saw challenges from interruptions in livestock deliveries, weather issues, lower ethanol demand and a late season drought in some areas. But a cocktail of circumstances had producers looking to buy following the 2020 harvest.

And while new investors are boosting demand for land, it remains the farmers who are the prime buyers of quality farmland.

“Government payments, crop insurance, low interest rates and rising grain prices sustained farmers’ interest in buying land, especially in the fall time frame,” Mohr said. “Farmers are currently buying 90 percent of the top quality farmland that comes up for sale and are fueling the strong demand-driven land market. Demand and prices for lower quality cropland are flat.”

Lands sales volume at the company were up 49 percent during October and November compared to last year despite there remaining a normal to lower supply of land for sale in the overall market, Mohr said.

“Investor interest and farmer demand will continue to drive the land market in 2021 and I expect we will see strong prices as we start the year,” Mohr said.

Overall surge may continue

Dickhut agreed that farmers are the main drivers of the overall market, in the Northern Plains and beyond.

“Farmers will buy 60 to 80 percent of what comes up for sale. Especially the good cropland, they really want that because they know it’s the most productive. They know if they farm it they benefit the most,” Dickhut said, adding that investor buyers will usually back out of auctions when the bidding gets too high.

Dickhut said the volume of sales has risen steadily through the 2000s up until 2013 and 2014, where it experienced a plateau, but 2020 has seen that volume on the rise once again.

“2020 was different because we had the lull in spring through mid-summer. In the fall that activity picked up and there were more sales and more land came on the market,” Dickhut said.

Pasture land demand and sales have not been quite as strong as for cropland, Dickhut said, but that is not entirely unexpected with the difficulties the cattle industry suffered in 2020.

“That has been slower than good crop land for various reasons. We’re getting some ranches sold, but sometimes they can sit on the market for a while before the right buyer comes up,” Dickhut said. “I think the rest of the winter and all through the year it will be interesting.”

Dickhut expects the demand for cropland to remain steady as 2021 progresses.

“There are low interest rates, the China trade issue is going better so they’re importing soybeans and with less land supply on the market for sales, put it all together it sure points to firmer land prices this year,” Dickhut said.

Rental rates

Average rental rates for some South Dakota farmland had dropped compared to previous years, according to the latest Agricultural Land Market Trends survey. The report, the 30th annual report issued by South Dakota State University Extension, was released in August of 2020.

At that time, the average case rental rate for 2020 non-irrigated cropland was highest in the southeast region of the state at a price of $179 per acre. The east-central region was next highest at $173 per acre, followed by the northeast at $146 per acre, the north-central at $109 per acre, the central at $99 per acre and the south-central at $72 per acre.

Cash rental rates for pasture land were highest in the northeastern region of the state at $64 per acre, followed by the east-central at $59 per acre and the southeast at $54 per acre.

The statewide average for non-irrigated cropland values also decreased in 2020 compared to 2019. In 2020, the survey value of South Dakota pasture and rangeland averaged $1,162 per acre, which comes to a 3.4% decrease compared to values from the previous year.

Farmers harvest corn north of Mitchell. (Matt Gade / Republic)
Farmers harvest corn north of Mitchell. (Matt Gade / Republic)