As we approach the end of 2017 and get ready to turn our calendars to 2018 it gives us an opportunity to reflect on the past year and look forward to the next year. 2017 was one for the record books here at DreamDirt. 2017 is the year people in our position felt the economic shift that many had expected in the pervious two years. We represented more clients, more real estate, more auctions and more acres than ever before. Despite a recent report showing Iowa farmland prices being up 2% in 2017 it was a more difficult to achieve the prices sellers had come to expect and especially so in the last half of the year. The economic pressures could be felt especially in auctions where we were selling medium to lower quality farms. For us we “feel” these things by lack of interest, lack of bidding, lack of competition or just in the comments made to us. If you were an auctioneer pre 2010 like I was you’ve felt this feeling before and you know the cycle and despite the downward pressure on those farms we were still able to successfully get them sold for the seller.
High quality farm sales in 2017 were still outstanding and will stay that way. Classes of farmland put more distance between themselves this year than any of the most recent years. We had an outstanding auction in Plymouth County ($13,770 an acre) in the Spring that was mentioned in The Progressive Farmer Magazine twice. This Summer we sold a farm in Buena Vista County, Iowa ($12,444 an acre) that shocked everybody in attendance and set the bar high going into the Fall auction season. In October we had a remarkable sale in Plattsmouth, Nebraska (Cass County) on a high quality tillable farm with 84 PI that sold for $8800 per acre with $100 an acre property taxes. We also had notable farmland sales in Guthrie, Madison, Chickasaw, Howard, Crawford, Winnebago, Floyd, Taylor and Emmet Counties that broke our expectations.
What will 2018 hold for farmland prices? I’ve talked about this in the past you can look back and my past blog posts here and my mind hasn’t changed much. I still believe there will continue to be pressure on medium and lower quality farms and farms with unfavorable timber to tillable ratios. Nobody has a crystal ball and nobody can see the future. I watch and read everything I can about the broader market to understand how all the pieces will play with each other. It can be fascinating to see how lower corn prices help livestock producers or how ethanol consumption by consumers affects corn prices. In a world as uncertain as we are in today and todays political climate it keeps even the smartest people guessing how things might play out. For every positive scenario you can find a competing negative scenario. In the political issues column trade is an issue today thats up in the air and has probably the biggest potential to affect land prices because it can affect supply and demand which will directly affect commodity prices and land is priced commensurate with its ability to create income. In previous years producers wrestled with input costs and while they have come down they are still above as a percentage of a producers budget what they were back then. Producers are experiencing pressure from many directions and as is the case nobody wants to blind first but all of this creates a situation that could have the potential to send distressed farms into the market directly affecting the supply of land available and in 2017 I feel the #1 reason farm prices remained as steady as they did was the lack of available farmland.
I had a discussion with a 71 year old farmer this Summer at one of our auctions in Northeast Iowa. He’s not distressed, he told me he was “sitting pretty good” and told me that he originally had intended to retire in 2013-2014 timeframe but in his words “it was too good” but today he said “Its just not worth it anymore” His conversation summed up what I’m sure many in his spot are feeling. Retiring farmers will often sell machinery but continue to own land for the income and because of the tax consequences of selling in their lifetime so while this demographic could add some acres to the supply I won’t see it being overwhelming or moving the needle much. You’ve got some young farmers out there that were really competitive during the boom that may have over extended themselves and while they may not own many acres they do add potential supply to the rental market which can alleviate demand for new acres. Then you have the demographic that has the potential to add significant acres to the supply side and it tends to be the middle of the road producers that aggressively pursued growth during the last decade. This sharp persistent downturn in commodity prices has taken its toll on some large operations in just that position and in some areas has added back significant acres in their areas.
Is 2018 gloom and doom? I’m not saying that at all but I am trying to point out that 2018 could be different from 2017 because we do have that potential to see additional supply which will topple the last and most important remaining pillar of land prices and thats scarcity. Secondary to that, the longer this persists the more it will cause a decline in farmland values. That doesn’t mean you can’t sell a farm today and get a great offer you still can and will but if you have a farm and you are considering riding this out and trying to sell it in a year the fact is not is likely a better time. If you are thinking of selling in 5 years maybe its different, thats a long time from now but farmland prices don’t rebound quickly. In fact, historically there is about 25 years between peaks in farmland prices. 25 years from 2013 is 2038! Only 2 more decades to go.
I’ve always had a theory that until 209-2010 farmland was undervalued. It was a misunderstood or little understood asset and I do believe that some of that plays into the boom in farmland prices over the last decade and more importantly I also believe thats why farmland prices are staying stubbornly high for producers that want to own more acres and the main reason I don’t feel we will see a “crash” in farmland prices. The world today is much different than it was just 20 years ago. You have a whole new demographic of ownership with investors of all kinds in the market. I also believe that land ownership became “the cool thing” to do sometime in the last decade. Not that it wasn’t ever the “cool” thing, land ownership is really the foundation of the American dream but when America went from 98% of its population being farmers to 2% of its population being farmers in 1 century land ownership was not important to people for a long time.
In 2018 I believe we will continue to see pressure on all classes of farmland if commodity prices don’t improve for one reason or another. Prices will creep slowly downward until prices do improve and they will at some point. There will continue to be spectacular sales in 2018 and there medium lower quality farms that are not the most desirable will continue to struggle to attract enough competition to find a top of the market offer and soon the “top of the market” will move downward to find a new equilibrium point.
2017 was an exciting year for DreamDirt! We were named 1 of 8 Top Auction Houses in The Midwest by Land Report Magazine! We had the honor of being involved in the December Cover Story on farmland prices called “Solid Footing” This is The Progressive Farmers biggest article on farmland prices every year! We were really on the move this year. In fact, our two farthest apart auctions this year were 6000 miles apart from Southern Paraguay to Northern North Dakota! In one week we drove 1121 miles from one auction to the next starting on the North Dakota/Canada border all the way to the Missouri/Arkansas border selling farms in both locations. Our team conducted 87 total auctions for farmers, heirs to farm estates and farm families in 2017 along with countless benefit and charity auctions where we donated our time and resources to help people in need. Most notably in 2017 we conducted a special auction in partnerships with the Iowa Cattlemen’s Association and raised over $50,000 for wildfire victims in the southern states. We always feel the reward of being able to help people raise money and while we are known for our fast talking that people know auctioneers for our team often brings more than just that to the table. We have been able to share contacts and resources, knowledge and expertise that has nothing to do with talking fast but provides a great benefit to the cause.
In 2017 we adopted the tag line “The Voice of Family Farms and their Heirs” We had worked on this for years, we wanted our tagline that very clearly summed up what DreamDirt is and who we represent. Much like the name “DreamDirt” it also came about complete by accident. One day this Summer we finished selling a farm and I was talking to my client who was particularly happy with the results. She was telling me more about the history of their family farm. She had done her research and was intimately familiar with every family member that had owned the farm over the last 125 years. She felt bad to sell it but she lived 8 states away and the hassle of owning it was more than she could take as she aged and while she had tried farmland ownership for 10 years she knew it was time to sell it. In the end she made the statement to me “At least in the end we had a great voice for our family, we appreciate all that you did for us” I drove home thinking about that and it rattled around in my head for weeks. It made sense, we are “the voice” and we are the best cheerleaders for our clients. We guide them through tough decision making helping them avoid the pitfalls of selling farmland and we do predominantly represent farm families or heirs of farm families. I was in the process of creating a new ad for our company for Land Report Magazine and I decided to add it and just see how it felt. We got many compliments on it. As time moved on we’ve continued to use it in other ads and come to fall in love with it and that it represents us so well. It also reminded us that we are not farm managers. As a professional in this field I am uncomfortable with farm managers that also sell farms. I’ve written about this before and I get some flak from peers because in our profession there are many that do manage and sell farms and it seems like a natural fit but as I’ve grown in this occupation I see to many conflicts that make it difficult for a farm family and their heirs to get real true representation by hiring a farm manager to sell their farm. The twisted tangled web of relationships necessary to be a farm manager and auctioneer or farm manager and real estate broker is really messy. I feel very comfortable in our role selling farms with no ties to any particular buyer, tenant or owner when my only responsibility is just to get the highest and best offer possible. My only allegiance is to the seller and I feel like DreamDirt does an exceptional job of just that.
In 2017 we were able to add new staff members to our roster to fill important roles in our company to ensure our clients get the best we have to offer and we have some great plans for 2018 that will include more new faces and roles in our company. We look forward to another great year serving the people we really enjoy so much and helping them have representation to the fullest. If we can help you in 2018 please let us know how. My direct cell phone number is 712-592-8965 and my email is firstname.lastname@example.org if you want to contact me.
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