Upswing in Minnesota farmland demand continues at record pace

By: Staff Report, Alexandria Echo Press

Demand for U.S. farmland is dramatically higher than a year ago, and everyone is watching closely for indicators of any market correction. Rising grain prices continue to make land a profitable investment. As a result, landowners are using profits to acquire land, and investors continue to take notice looking for opportunities.

“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen,” said Lee Vermeer, AFM, vice president of real estate operations at Farmers National Company. “Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”

While commodity prices are keeping land values rising, supply of available land for sale is down 30 percent from historical numbers, according to Vermeer. High grain profits and high farm income are tied to the demand for farmland, driving prices up. Low interest rates are also working to keep prices increasing.

“The total crop from last year wasn’t what was projected,” said Vermeer. “The result was a limited supply which resulted in increased prices. We are looking ahead to continued strong commodity prices due to late spring planting. Early summer floods are reducing crop acres.”

Regional Land Value Reports

Iowa and Minnesota

The land market continues to be very strong in the North Central Region including Iowa, Missouri, Minnesota, South Dakota and North Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. Buyers are looking for quality land, with the majority of sales going to farmers.

“There are fewer properties for sale and the spread between low quality land prices and high quality prices continues to widen,” said Kain. “I would say land values in some areas have increased as much as 20 percent in the last six months, and as much as 25 percent compared to a year ago.

In Iowa, top quality land is selling at over $8,000 per acre, with Minnesota values bringing in $7,000 plus per acre. While sales of medium quality land and recreational land in this area have been slow, the pace for high quality keeps rising.

Not only is demand for top land still rising, the availability of property for sale remains limited. Buyers are looking for land with high productivity levels, which is a challenge.

“In my more than 25 years in the business, I have never seen more demand than now,” said Kain. “This is not only from farmers but from individual investors and investor groups.”

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