From the Farm: Land Values

Agriculture

CENTRAL ILLINOIS (WCIA – What is the price of good farmland these days?

Farmland values are exploding upward and farmers are the primary buyers, said Randy Dickhut, who is in charge of real estate for Farmers National.

“Here we are, post-pandemic, with extra government money that came in 2020, some better commodity prices, better net farm income for a year or two, really has propelled the land prices,” Dickhut said. “Here is a little more on the market for sale, but the demand is higher than that, and they have really escalated about everywhere.”

With those remarks, it seems farmers are buying as opposed to investors buying.

“Farmers tend to buy most of what comes up for sale. Normal years it will be 60-80%. We think right now that it is probably 80-plus-% the farmers are buying,” Dickhut said. “The rest is individual investors that might have some 1031 exchange money or they might want to invest in farmland as an inflation hedge, which kind of came about post-pandemic too, as people are looking at the longer term value of farmland.”

What should the value be right now and yes, the value is what somebody would pay for it?

“Well, it’s going to depend on your investment philosophy, I guess,” Dickhut responded. “For the farmer, when that farm comes up for sale once in every three or four generations, and they want to expand their operation base for the next generation, or invest in land as a retirement, they’re going to buy that, because the farmer has the better economic picture to buy land than the investor even, because they are getting the whole amount of income.”

“As an investor, you are only getting the rental portion of that income each year, so the farmer has a little economic advantage,” Dickhut continued. “Plus, it works into their operation, spreads their cost, and it’s a long-term investment that they are familiar with. And it’s a safe investment as most people turn to it.”

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