Land values said to be 'resilient'

WEST FARGO, N.D. - Crop prices are poor, and farm profits are limited, even non-existent. So it stands to reason that the price farmers pay to buy and rent cropland is slipping, right?

But that's not the case. Though trends vary from area to area, "Land values are resilient" overall, holding steady or even inching higher, said Brent Qualey, veteran area real estate salesman and appraiser with Farmers National. His company describes itself as "the nation's leading agricultural landowner services company."

He spoke Sept. 10 at the annual Big Iron Farm Show in West Fargo, N.D. The show, which ended Sept. 12, promotes itself as an opportunity to see the newest farm equipment and agricultural products.

But Big Iron also offers speakers who address farm issues of general interest. Qualey was part of a session that examined farmland values and rental rates. Also on the panel were two of his Farmers National colleagues, Kyle Nelson and Rick Skolness. Qualey and Nelson are based in Fargo, Skolness in Glyndon, Minn.

Qualey acknowledged that it may surprise many to hear that farmland values generally are holding their own.

"We can think of many reasons they (farmland values) should be lower," including poor commodity prices and tariff issues. But they remain relatively strong nonetheless, he said.

The message from Qualey, Nelson and Skolness corresponds with two reports this summer from the U.S. Department of Agriculture, both of which found that U.S. average land prices and rental rates rose slightly over the past year.

The reports didn't address why land values haven't fallen. But experts have cited three major factors:

• Interest rates on competing investments such as certificates of deposit remain relatively unattractive.

• Some farmers are in good financial condition and have both the money and desire to acquire more land.

• U.S. farmland prices generally soared during the 2008-2012 ag boom that brought high crop prices and strong farm profitability. But Upper Midwest farmland prices didn't rise as fast or high as they did in many parts of the country, giving area farmland values more room to rise now.

Qualey told Agweek before the meeting that all three factors appear to be in play.

For example, farmers willing and able to buy or rent more land are helping to hold up land values. "They're buyers in the market now," with 70% to 80% of the land changing hands sold to farmers, Qualey said.

Skolness said Farmers National uses a lease analysis to help determine the proper rental rate for cropland owned by its clients. But the relative strength or weakness of cropland values in any given area is the biggest factor in determining rental rates, he said.

Nelson said determining land values for fields coming out of the Conservation Reserve Program can be difficult.

Qualey said that while nothing is certain, he doesn't think farmland values are likely to fall sharply anytime soon.

Agweek's annual cover story on cropland rental rates will be published later this year.