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Southwestern Minnesota farmland values decrease 3.1 percent in 2020

The annual survey has been conducted of farmland sales in fourteen southwestern Minnesota counties. The survey collects bare farmland 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, remained constant in 2019, and then declined in 2020. 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 3.1 percent. Southwest Minnesota land prices peaked at $8,466 per acre, then declined in 2017 to $6,340. Prices increased in 2018 to $6,589 and declined slightly to $6,576 in 2019 and then to $6,371 in 2020.

Farmland
The largest increase year to year was in 2013, with an increase of 35.6 percent. Farmland p
rices decreased in nine counties and increased in five counties, including Jackson, Martin, Murray, Pipestone, and Redwood from 2019 to 2020. There was a lot of variability in the numbers from 2019 to 2020. The largest increase was in Martin with an increase of 28.6 percent while Lincoln experienced the largest decrease of 33.6 percent for the sales that met the bare farmland to non-related party transaction requirements. Martin County had the highest average sale price of $8,894 per acre and Lincoln had the lowest at $3,853 per acre. 

The average Crop Equivalency Rating (CER) for the fourteen counties was 68, with the highest price per CER in Pipestone county at $99.61 and the lowest in Lincoln County at $70.21 per CER. The assessed values were lower than actual sales price with the assessed value at 98.93 percent of the sales price. Historically, the assessed value would be 75 to 80 percent of the sales value. Eight counties experienced average sales prices that were lower than the assessed values in 2020. While six counties experienced average sales prices that were more than the average assessed values, the lowest percentage was 91.61 percent in Martin County.

Each year, sales vary within a county and 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 3.1 percent 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 percent. But from 2014 to present, the average change has been 4.6 percent 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. Average incomes improved in 2019 and were higher in 2020.

If the average farmer had losses from 2014 through 2018, this would soften local demand for the land from farmers. Interest rates have stayed relatively flat 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 2020. 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 farmland sale prices, contact the local county Extension office at any of the fourteen counties listed above.

Which direction will farmland values go? It 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 did not take off until after these sales were collected for 2020. This should have an impact on profits, farm rental rates and eventually farmland values. The government program payments increased dramatically in 2020. The table below indicates average land prices from 2015 to 2020.

County

2015

2016

2017

2018

2019

2020

Chippewa

$7,286

$5,699

$6,578

$6,460

$6,336

$6,231

Cottonwood

$6,400

$6,450

$7,266

$7,322

$8,064

$5,811

Jackson

$7,311

$6,825

$7,399

$6,671

$6,361

$7,334

Lac qui Parle

$4,765

$4,191

$5,111

$5,105

$5,049

$4,684

Lincoln

$6,432

$4,482

$4,415

$5,312

$5,806

$3,853

Lyon

$6,078

$6,538

$6,057

$5,358

$5,607

$5,509

Martin

$7,513

$7,744

$6,370

$6,120

$6,915

$8,894

Murray

$6,207

$6,890

$6,135

$6,406

$5,446

$6,055

Nobles

$8,200

$8,828

$7,132

$8,548

$8,152

$6,664

Pipestone

$6,315

$7,651

$5,478

$6,211

$6,914

$7,119

Redwood

$7,283

$6,459

$6,852

$7,114

$6,600

$6,858

Rock

$11,148

$10,753

$7,545

$8,656

$8,851

$8,698

Watonwan

$6,681

$6,749

$6,588

$7,373

$6,006

$5,948

Yellow Med.

$5,387

$5,325

$5,830

$5,584

$5,959

$5,533

Average

$6,929

$6,751

$6,340

$6,589

$6,576

$6,371


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