Land values holding steady as water increasingly affecting prices
According to Colton Lacina, an accredited farm manager and senior vice president of real estate at Farmers National, rural land values have continued to hold up.
“There’s a slight softening of prices for marginal land,” Lacina told High Plains Journal, adding that more farm acres are set to come onto the market in November and December.
The buying is being driven by two main groups: Producers themselves, and institutional investors like private equity funds. But a third group of local investors has become a more active player. This group is not yet as big as traditional institutional investors like funds, but it’s having an impact, nevertheless. Lacina describes this new group as made up of high-net-worth individuals who live in or near rural areas, have accumulated investment capital, and are seeking “hard” assets like rural land.
In part, this is because they are nervous about the stock market’s relentless climb. “They wonder if we are due for a correction in the stock market, and land traditionally had been strong hedge against the stock market,” he said. “It’s a form of risk reduction,” he said.
They are often willing to lease purchased land back to producers to keep it in farming.
So, who is selling? Lacina said it is not necessarily the first generation to move away from the farm—it’s their kids.
“That first generation was raised on the farm and thinks of land as a legacy,” he said, “even if they got a job in the city and never went back to farming. But their kids who were raised in town don’t necessarily feel those connections. They often sell the rural properties relatively quickly.”
In addition, rural markets are “hyper-local”—especially if the properties are adjacent to “aggressive producers.” “You can’t really describe the land market in County X,” he said, “because it could be very different in the northern vs. southern part of the county. That’s where a local land agent can become really important.”
One factor looms over all others in pricing of farmland, and it will only grow in importance—water.
“Sales are strong across the U.S., but we’ve seen an uptick of interest in the southeast part of the U.S., because they don’t have the same water issues as in the West. Water is going to be more and more of a driving factor in land prices in coming years.”
David Murray can be reached at [email protected].
