At
the end of each year for the last twenty-five years, a survey has been
conducted of farmland sales in fourteen southwestern Minnesota counties. The survey reports bare farm land sales to
non-related parties for the first six months of each year. Land values had been
steadily increasing until 2014. After
reaching record high prices in 2013, the upward trend was broken as prices
declined in 2014 and continued down through 2017. The trend changed to an increase in 2018 and
remained constant in 2019. The summary
report for this survey is available at the county extension offices in
Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray,
Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine counties. This year, the decrease across the fourteen
counties averaged 0.2%. SW Minnesota
land prices peaked at $8,466 per acre and then declined through 2017 to $6,340
until increasing in 2018 to $6,589 and declined slightly to $6,576 in 2019.
The
largest increase year to year was in 2013 with an increase of 35.6%. Farmland prices decreased in seven counties
and increased in seven counties including Cottonwood, Lincoln. Lyon, Martin, Pipestone,
Rock and Yellow Medicine from 2018 to 2019. There was a lot of variability in the numbers from 2018 to 2019. The largest increase was in Martin, with an
increase of 13%, while Watonwan experienced the largest decrease of 18.5% for
the sales that met the bare farmland to non-related party transaction
requirements.
Rock
County had the highest average sale price of $8,851 per acre and Lac qui Parle had the lowest at $5,049 per acre. The
average Crop Equivalency Rating (CER) for
the fourteen counties was 69 with the highest price per CER in Chippewa County
at $103.66 and the lowest in Lincoln County at $77.23 per CER. The assessed values were lower than actual
sales price with the assessed value at 96.6 percent of the sales price. Historically, the assessed value would be 75
to 80 percent of the sales value. Five
counties experienced average sales prices that were lower than the assessed
values in 2019. While nine counties
experienced average sales prices that were more than the average assessed
values, the lowest percentage was 89.86% in Martin County.
Each
year sales vary within a county land location could have an effect on these
average values from year to year. The
quality of the land sold within a county may be a factor in the wide swings in
the prices from year to year in individual counties. The number of sales in
each county varies greatly from year to year. The 0.2% decrease is below historical increases of 1 to 2 percent. For the last ten years, there have been large
percentage changes. In the eight years
before 2014, prices increased at an annual rate of 15.3%, but from 2014 to present the average change
has been 4.8% decline. There are
several factors that have an effect on land values. Farm incomes, grain prices, interest rates,
return on other investments and 1031 exchanges are often mentioned as reasons
for the increase. Farm profits were
weaker in 2013 and turned negative since 2014 with lower commodity prices. There were good to record profits in the
Southwest Minnesota Adult Farm Management program, from 2005 through 2012. During 2013, half the farms in adult farm
management in Southern Minnesota lost money on corn production. These losses have continued through 2019.
Many hog and dairy producers experienced a tough year in 2010, many with losses
instead of profits with poor prices for their commodities and high feed
costs.
If
the average farmer had loses from 2014 through 2019, this would soften local
demand for the land from farmers. Interest rates have started to slowly increase and land rental income is
comparable or higher than what an investor can earn from treasury bills, bonds
or certificates of deposit at financial institutions. The stock market increased in 2019. The 1031 exchange is for farmers or property
owners who have land in an area of increased value due to location to city or
development and rather then pay taxes on large gains from the sale of land they
purchase like property or other farmland at a more reasonable price elsewhere,
which increases rural farmland demand. The reason for increases or decreases in farmland sales prices is a
combination of all of these factors. If
you would like a copy of the two page document on the trends in farm land sale
prices, contact the local county Extension office at any of the fourteen
counties listed above.
Which
direction will farmland values go depends on several factors. Supply and demand will determine this. The
simple return on investment, which is determined by rental rates, will determine
how competitive farmland is compared to other investments and this will
determine a value for farmland. Corn
and soybean prices for 2019 crop are still at lower levels than previous
years. This should have an impact on
profits, farm rental rates and eventually farmland values. The government programs have an influence as
well, through the farm bill. If interest
rates rise or farm rental rates fall, the value of land is sure to be affected
in a negative way and that will cause a decrease in land values. The
table below indicates average land prices from 2013 to 2018.
| County | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
| Chippewa | $7,011 | $7,286 | $5,699 | $6,578 | $6,460 | $6,336 |
| Cottonwood | $8,790 | $6,400 | $6,450 | $7,266 | $7,322 | $8,064 |
| Jackson | $7,984 | $7,311 | $6,825 | $7,399 | $6,671 | $6,361 |
| Lac qui Parle | $4,251 | $4,765 | $4,191 | $5,111 | $5,105 | $5,049 |
| Lincoln | $6,661 | $6,432 | $4,482 | $4,415 | $5,312 | $5,806 |
| Lyon | $7,918 | $6,078 | $6,538 | $6,057 | $5,358 | $5,607 |
| Martin | $9,341 | $7,513 | $7,744 | $6,370 | $6,120 | $6,915 |
| Murray | $6,722 | $6,207 | $6,890 | $6,135 | $6,406 | $5,446 |
| Nobles | $7,347 | $8,200 | $8,828 | $7,132 | $8,548 | $8,152 |
| Pipestone | $7,433 | $6,315 | $7,651 | $5,478 | $6,211 | $6,914 |
| Redwood | $9,023 | $7,283 | $6,459 | $6,852 | $7,114 | $6,600 |
| Rock | $9,353 | $11,148 | $10,753 | $7,545 | $8,656 | $8,851 |
| Watonwan | $7,549 | $6,681 | $6,749 | $6,588 | $7,373 | $6,006 |
| Yellow Med. | $7,154 | $5,387 | $5,325 | $5,830 | $5,584 | $5,959 |
| Average | $7,556 | $6,929 | $6,751 | $6,340 | $6,589 | $6,576 |
For more information, contact Dave Bau, Extension Educator, Ag Business Management: 507-372-3900 ext. 3906, bauxx003@umn.edu
