As we look forward to a new year, we look for new beginnings and growth opportunities. Part of that, of course, is looking for more acres to buy or rent.
I’ve visited with quite a few farmers who are working to purchase farmland from existing landlords or family members, or are even considering bidding at one of our upcoming auctions. A lot aren’t quite sure whether they should jump in. “Prices are just so high. Maybe it would be better to wait,” they say.
My response? If it fits nicely into your existing operation and you can swing it, don’t hesitate to pay the going rate — or even a bit more if that’s what it takes to get the deal done.
There’s little reason for me to see land prices correcting in a major way in the next year despite the headwinds facing agriculture.
Haves and have nots
We are in an environment where there are quite a few farms out there with major financial issues in front of them. Some have been self-inflicted, but others have been the byproduct of bad luck — perhaps multiple crop failures with bad insurance coverage or limited direct payments due to not meeting some criteria. Or maybe it’s a combination of the two.
Then, there’s what I would tell you is the majority of folks in production agriculture: strong balance sheets, excellent equity through land and incredibly strong borrowing positions — or, frankly, a lot of cash they don’t know what to do with.
Couple that with peripheral money, meaning investors, and you can see why this land market might not correct itself like many think it should when looking at annual cash-flow projections.
So, what is the land market going to look like this spring? Early indications would point to a busier than normal spring in terms of acres sold. Part of that is the wealth transition taking place right now, which I’ve written about in the past.
Another part of that, sadly, is I think there will be a few farmers who have to sell land to raise funds for working capital or to pay down debt to be viable to the banks.
Land market outlook
My prediction is there will be a healthy appetite for the land that hits the block. Like 2024, there is just no give in sight and, as a matter of fact, the land market firmed up postharvest in 2024.
In other words, I think in quite a few instances if we sold the same farms that we sold in September in November or December, they would have probably brought in more.
Part of this is due to the sentiment change that occurred after the framework of a trade deal was agreed upon by the U.S. and China. The other part was the natural optimism that occurs postharvest after a good to above-average year.
If you’re looking to buy, don’t wait too long. If you can swing it, take the opportunity to buy that land your family has been farming for decades, even if the selling family thinks it’s worth a little more than you’d like to pay.
You or your family will be glad you did one day soon, and the price will probably look cheap quicker than you think. Don’t believe me? Ask a farmer or rancher who’s been around a while about the land they’ve bought over their career. It’s always too much. “Wish I’d have bought more,” anyone?
If you’re a seller, or perhaps your family is considering transitioning land you’ve owned for years, don’t let the headwinds in agriculture keep you from taking your land to market if the timing is right for you. There is still fantastic demand for land, regardless of type and quality.