Farmland Prices in 2021 May Be A Reflection of 2011

May 3, 2021 | Farmland Prices, Iowa Farmland Prices, Land Auctions, Land Seller Resources

Jason Smith

Jason Smith

Auctioneer, Land Broker

Jason is an Auctioneer and Land Broker and founder of DreamDirt, He is a lead farm real estate professional in the Midwest and has pioneered many modern methods of selling farmland. His experience in helping lead families to successful farmland transactions spans 2 decades and a myriad of advanced marketing skills and designations has helped propel him to be one of the most successful farmland auctioneers. The company he founded, DreamDirt, continues to be a leader in the farm sales and auction space and prides itself in offering extensive land seller and buyer information as well as outcomes that exceed expectations.

Email: jason@dreamdirt.com | Phone: (515) 537-6633

A decade ago I was 5 years into my farmland sales career.  I had sold a fair amount of farmland by that time.  I was a new agent compared to so many others that had been in the occupation for 3 decades.  I spent my first 5 years mentoring under multiple different top brokers that had lots of experience to share.  I can remember that 2009 started off especially difficult and slow, land sales volume was low, prices weren’t all that attractive to sellers.  As we neared 2009 things were changing, we had a little spike in corn prices at the end of the year.  2010 came by mid year commodity prices were on an pretty good uptick.  By the time 2010 left us the match that lit the dynamite corn prices were on a rocket and farmland prices were drastically climbing faster than anybody could really imagine.  

 

2011 Was a Wild Year in Land Prices

2011 was really the most memorable year for me as a land salesman.  All of a sudden everybody wanted to sell their farm and everybody wanted to buy it.  Auctions became BIG NEWS and each one outdid the last one.  One of my most memorable experiences selling land came in 2011 when a family hired me to sell 2 farms for them in Shelby County, Iowa.  I met with the family and discussed the sale multiple times before we finalized the plans.  A part of our meetings dealt with the potential value of the farm.  I estimated their farm would sell for $4,000 per acre and it sold for $9,000 per acre.  As land salesmen we were a bit baffled by what was happening, it was hard to understand what the market was doing at times.  Was it short term? Was it long term? Was a bubble developing? Would farmland prices moderate the next month?  We had difficulty behind the scenes estimating what something would sell for.  I can recall that for good farmland at the time we were estimating $71 per CSR point, but then sales would be coming in hitting $100 a point, We’d adjust up a little to $90 to make sure we were being safe, but then sales would come in at $110 a point – so we’d adjust to estimating at $100 and it just kept going up and up and up!

Current Corn Price Chart 2012 to 2021

Land Auctions Shined Bright and Brought Maximum Value

The auction method of marketing got an opportunity to shine during this period and many people got to see the power of auctions, especially in an accelerating market.  By 2012, it was pretty well established. We’d entered a new era of farmland prices.  Issues from ethanol production, growing farms, and farmland investors had truly changed the farmland market forever.  This period became so recognized that the national news outlets would start calling me wanting to come to Iowa and do stories about selling farmland and farmland prices.  During 2012, I was the only person on the internet blogging about farmland prices so I was asked to appear on many national news programs and newspapers, even radio programs.  There was a really sharp focus on what was happening in the Midwest.

We sold a lot of farms through 2012 and I’d continue to work under other brokers until mid 2013 when I launched my own business farm real estate brokerage named DreamDirt!  Having been a top producer in farmland sales, I was prepared to lead a team and bring our own unique vision to farmland sales.  By 2013, we started to see farmland prices fall off a bit from their peak  average of $8,716 per acre in Iowa.  Future years would see average farmland prices in Iowa hover between $7,200 and $7,800 per acre, just off of the highs but still less demand and competition.

 

Farmland prices follow commodity prices more closely than any other index or measure as its a direct correlation to the farmers profitability.  During times of high commodity prices we always see spikes in land values which are often followed by declines in farmland values.  As we enter this period of rising commodity prices it is coupled with very low interest rates.  The interest rate to borrow money has a direct effect on the amount of money a farmer can bid or offer on a farm and becomes a limiting factor.  Today’s interest rates are very favorable for borrowing money and making purchases of land.  This is also favorable for persons selling land as they are able to capture more of the lands value rather than it going to the bank as interest in the buyers offer.  In other words, the more a farmer has to pay in interest, the less he can pay you for the farmland.

Will 2021 Land Sales Be Like 2011 Land Sales?

When you compare two time periods you can always see the similarities, but there will be differences as well whether they are economic or otherwise.  2021 is a different year from 2011, in fact in many ways it almost feels like a different world as we find our way through the COVID pandemic and the mark it left.  Ethanol subsidies were allowed to expire which had an indirect impact on corn prices.  Mortgage interest rates are lower today than a decade ago.  We are starting this period at an average farmland price much higher than the last when it was much more undervalued going into the run up.  Today there are fewer farmers and farms are larger.  We are more efficient at farming, at least slightly more than a decade ago with new technology coming to market every year.  Even auctions changed immensely during the past decade with our offering of online land auctions!    That said, the very foundation is exactly the same.  Farmland is a highly sought after and necessary resource and is a valuable asset.  People still eat food and always will.  Oh, and corn prices are doing what they did back in 2011.  The same questions we asked then, we are asking again.  Was it short term, was it long term, was a bubble developing, would farmland prices moderate the next week?  I learned from the last time as a land salesman I have no control over any of it, I can wish and wish but the market will do as the world directs it.

There is one thing you can absolutely count on in all of the noise and considerations, when commodity prices are high, farms sell for more money.  We are still a dollar below the highest price we’ve ever seen in the corn market, but we don’t know where we are going either.  If you are considering a sale of farmland I believe right now you are in a unique window in history that doesn’t repeat often.  They are small windows, they are short lived but if you hit it right, you’ll benefit greatly from your fortune of timing.

If you are considering selling a farm we can help you achieve the maximum price with the many resources and services we offer including land listings, live in person auctions, and online land auctions.  Click the button below to learn more about the services we offer land sellers.  You will find tremendous value and benefit in our services.

 

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