Specialist in farmland values: West central Minnesota values have softened
PRINSBURG, Minn. -- Farmland values in west central Minnesota have softened, still sliding from the peak reached in 2013-14 when commodity prices were at their high too.
PRINSBURG, Minn. - Farmland values in west central Minnesota have softened, still sliding from the peak reached in 2013-14 when commodity prices were at their high too.
"A lot of indecision and wondering,'' is how Bryan DeGroot characterizes the market for farmland today. Owner of DeGroot Farmland Sales in Prinsburg, he brings the perspective of 38 years of experience and $67 million in sales over that period. He was one of the area's first real estate agents and broker to specialize in farmland sales. The majority of his work is in Kandiyohi, Chippewa and Renville counties.
It's not hard to explain today's soft market. Corn prices are stuck at $3 a bushel, about a $1 below the break-even point for many, he pointed out. Input costs remain high. A political year with a full range of federal and state offices up for grabs adds to the uncertainty.
DeGroot remains hopeful. Yes, a string of years with $3 corn would drag farmland values down. But he believes corn prices will rebound. And, he points to what promises to be a bin-busting crop waiting in area fields. Big yields can reduce the losses.
DeGroot grew up on a Prinsburg farm, and after college returned to farm with his older brother.
"And then I tried desperately to buy some farmland,'' DeGroot said.
Then as now, it was extremely difficult for a young man or woman to buy a farm and start out. It was the making of his life's career. After knocking on every door he could in his quest to buy a farm, he realized that there were very few real estate agents specializing in farmland sales.
"There weren't many Realtors specializing in it at the time and all of a sudden it came in my mind,'' he said.
He began his career in farmland sales in 1978, and earned his broker's license in 1980. The changes he's witnessed since then are dramatic.
"I sold very good farmland for $700 an acre at its low and for $10,800 at its peak. Same township, within a few sections apart,'' he said.
Believe it or not, until the housing bubble burst, urban sprawl in the Twin Cities had a "significant'' impact on farmland values in west central Minnesota. Developers were making lots of money and investing in farmland to defer capital gains taxes.
Some "had so much money in their pockets they needed to spend it somewhere, somehow. Many didn't even negotiate it much, just purchased what was available,'' DeGroot said.
The bubble burst and stock prices tumbled. Still, investors continued to drive up farmland values through the years 2000-2010, DeGroot said.
Today he is seeing more farmers buying farmland in place of investors. While farmland values have softened, cash rental rates have not. He's watched cash rental rates rise from $70 an acre to $400 an acre plus through his career, with downward slides very rare through this period.
He's watched changes in agriculture long enough to know that cycles can come and go too.
There are some ironclads. "One acre of farmland has never paid for itself from the day I started until now,'' DeGroot said. Farmland owners have to leverage newly purchased land with other land to make it work.
Yet in the long term, farmland remains a strong investment with a rate of return ranging from 3 percent to 6 percent. It's also a different animal in the real estate world, far different than buying a house or apartment. Treated with proper stewardship, it does not deteriorate, he explained. And, of course, they aren't making any more land.
Today he realizes that he had the good fortune of starting his business in the midst of some of the world's best farmland. This area is rich in the heavy, black soil that everybody wants.
"Precious commodity that we we have, we are pretty fortunate to be right here in the middle of a garden,'' he said.
DeGroot is assisted in the business by his wife, Sue, and together they raised four children. There's been no guaranteed paycheck as a business owner, and during his early years, there were plenty of long stretches between sales.
"A good faith building walk, this type of life,'' he said. "You need the Lord's hand, need his favor, need his touch.''