WEST FARGO, N.D. - There's still demand for area farmland, and the market isn't surfeited with supply. As a result, farmland rental rates and land values have held up better than some people expected, given generally weak commodity prices, Brent Qualey says.
Though there are variations reflecting geography and land quality, "I think the level of stabilization came in at a higher level than many had anticipated," said Qualey, a veteran area real estate salesman and appraiser.
Qualey spoke Sept. 12 at the 37th annual Big Iron Farm Show in West Fargo, N.D. The three-day event ended Sept. 14
The show focuses on the biggest, newest types of farm equipment, as well as agricultural inputs, but offers a number of seminars, too. Qualey was part of a session that examined land values and rental rates. Also on the panel were two of his Farmers National colleagues, Kyle Nelson and Jayson Menke. Qualey and Nelson are based in Fargo, N.D., and Menke in Grand Forks, N.D. The three are regular presenters at Big Iron.
Farmers National describes itself as "the nation's leading agricultural landowner services company."
Area farmland values and rental rates soared to record or near-record highs in 2013 and 2014 after a multi-year run of strong prices and farm profitability. Crop prices and farm profitability have slumped in the past few years, leading to widespread expectations that farmland prices and rental rates would fall sharply, too. On balance, however, that hasn't happened so far, Qualey, Menke and Nelson said - at least partly because relatively little land is coming up for sale.
"We don't see a flood of land coming onto the market, and I think that's the reason we have the stability we do," Qualey said.
At the same time, there are farmers who continue to want to acquire land, either by buying it or renting it, which helps hold up demand, the three Farmers National panelists said.
Farmland values also are boosted by relatively low interest rates. Though they have edged higher in the past year, rates still remain low by historic measurements. That encourages farmers and other investors to buy or hold on to their farmland, which can provide a higher return than CDs and money-market funds, Qualey, Menke and Nelson said.
Much of northeast North Dakota was hit by massive rains in 2016. Some fields received twice as much precipitation as normal. That crippled yields, hammered farm profitability and led to questions whether some hard-pressed farmers in the area would be forced to sell land during the winter of 2016-17.
But that didn't happen, at least not to the extent that some had thought possible, Menke said.
"It was almost spookily eerie that there wasn't more land on the market," he said.
Northeast North Dakota crops generally fared well this year, which should help reduce financial pressure, Menke said.
This year, drought is hammering parts of the region, particularly western North Dakota and South Dakota. But that probably won't have a huge impact on land values and rental rates there, Nelson said.
Rental rates and land values in the area generally rose only modestly during the ag boom and consequently are less likely to fall sharply. Also, dry conditions in the western Dakotas are not uncommon, which already is factored into land prices, he said.