Changes in land prices

Original data from Department of Revenue compilations of Certificates of Real Estate Value, further adjusted by that agency and by the author, as described on the sales study site linked at the top. Prepared by William F. Lazarus Department of Applied Economics University of Minnesota.

Following years of rising farmland prices, the 2013-2016 Minnesota median farm real estate sales price market showed a drop from the 2012 peak of $4,917 per acre.

The median (middle price) farm real estate sales price in the 2016 calendar year was $4,725 per acre – down 4 percent from 2012 across the state.

Minnesota Farm Guide is marking its 15th anniversary with a lookback at changes in agriculture from 2002 to 2017.

When the farm publication debuted on May 17, 2002, farmland prices were moving in one direction – up.

In fact, the average price of Minnesota farm real estate moved higher from 1985 to 2012.

The agricultural community realized commodity prices were softening by harvest of 2013. Land prices also softened.

“Land prices are affected by many factors, but crop prices may be the most influential,” said Bill Lazarus, University of Minnesota agricultural applied economist.

Prices above $4 per bushel for cash corn were common until late July 2014, and soybean cash prices remained above $10 until January 2015.

He pointed out that the average Minnesota December corn price rose from $1.79 per bushel in 2002 to a peak of $6.68 in 2013, before settling back to $3.65 in December of 2016.

Simultaneously, the median farm real estate sales price per acre moved from $4,887 in 2014, to $4,776 in 2015, and $4,725 in 2016.

Lazarus added a caveat – “Use of a single number as the price of land for any area – county, region, state – can be misleading,” he warns.

Seasonality has a role in land sale prices as well, he said. More land is sold in the fourth quarter of the year – following harvest – compared with the third quarter when harvest is going on.

Land sold in the third quarter may include “distressed sales” with lower prices than in the fourth quarter when planned sales take place.

Oftentimes, reports will list prices for the first three quarters of the year, which can make the current year sales look lower than the final tally.

He pointed out that farmland sales have stayed strong because corn and soybean yields have increased in Minnesota.

Minnesota farmers obtained a very respectful corn yield of 157 bushels per acre in 2002, yet in 2015, that average was 188 bushels, and in 2016 – 193 bushels per acre.

In 2002, Minnesota soybean acres averaged 43.5 bushels per acre – an excellent yield. In 2015, farmers raised an average of 50 bushels per acre, and 52 bushels per acre in 2016.

Selling more bushels at a moderate price sometimes offers a larger gross income than selling fewer bushels at a high price. The cushion of larger yields can make up for lower prices and allow farmers to increase their farmland bids.

More information on recent trends is available on the Minnesota Land Economics website, http://landeconomics.umn.edu/.