After rocketing upward in recent years, farmland values have leveled off and even started to drop in parts of southeastern Minnesota.
Even more dramatically, the number of sales of farms has plummeted in area counties in 2013. Sales totaled 106 in the eight-county area, less than half of the 259 in 2012, according to a database kept by the University of Minnesota.
Key factors are a big drop in corn prices, as well as a natural correction to a rapidly rising market.
"The land market ebbs and flows, as many markets do," said Kirk Swenson, president of 1 Stop Realty in Kasson, who added that he expects a relatively small drop.
With dropping corn prices, fewer people want to buy or sell, farm onlookers said.Prices were about $3 a bushel in 2010, and they soared to nearly $7 in the 2012-2013, driven in part by the ethanol boom.This summer they've dropped back down to near $3 a bushel.
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"The corn price has a huge influence on what the market is doing," said Randy Queensland, owner of Land Resource Management & Realty in Grand Meadow. "It reflects income, and the value of the land, within a certain degree."
The per-acre farmland value data are gathered by Minnesota Land Economics, a project of the University of Minnesota, from county assessors and other reporting districts. It looks at all land classified Agricultural 2A, which is most farmland but doesn't include timberland.
The average per-acre sale price of farm land fell in Dodge, Goodhue, Wabasha and Winona counties from the previous year, most dramatically in Goodhue, where it was down 18.9 percent to $5,680.
Still, prices increased in Fillmore, Houston, Mower and Olmsted counties. Mower remained the highest priced agriculture land in the area, reaching $8,094 an acre, on 19 sales.
Sales dropped in every single area county by more than half, including from 70 to 23 in Fillmore and from 44 to 17 in Goodhue.
Still, the good news is that the farm economy remains very healthy, as most operators aren't forced to sell in a panic because of financial hardship, Queensland said.
"The land is held by financially strong people, and most of the operators are in good shape," Queensland said. "I think it's a real stable market."
During the farm crisis of the 1980s, part of the problem was that some farmers had borrowed 90 percent of the amount they paid for the land, so a drop in prices made it hard for them to afford payments. Banks no longer let farmers borrow much beyond 50 or 60 percent of the price, Swenson said.
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Farmers and investors have been competing for land for several years now, Swenson said. But now the crop prices paid to the farmer are dropping, and the rents paid to investors are likely to drop, so that competition should slow, Swenson said.
"Agriculture has been pretty good for quite a little while, but that scenario appears to have ended for a short while anyway," Swenson said.
Land is a limited commodity that had a rapid increase in recent years because of a perceived land shortage. "We cracked $10,000 an acre on land that in the 80s sold for $550 an acre," Swenson said.
The correction has increased the differential in land prices, as high-quality land still sells for good prices, but lower quality land, not so much, Swenson said.
What does the future hold? It depends on where corn prices go, but likely farmland sales will remain pretty flat, Queensland said. "Unless something comes around, it looks like we're going to have to deal with corn prices that are cheaper."
Despite low crop prices, other factors are helping to keep the land market steady, said Randy Dickhut, vice president of real estate operations for Omaha-based Farmers National Company, which sellsfarmland across the Midwest.
Low-interest rates are available to finance deals and many farmers still have plenty of cash on hand to invest in land, Dickhut said, "profits that farmers and landowners have realized over the last few years."
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