Quality Farmland Prices Appear Steady

DTN writer Victoria Myers reported recently that, “As many land auctions have moved online over concerns of the spread of COVID-19, prices for quality farmland have appeared to remain strong.

“Last week [May 4th], R.D. Schrader, president of Schrader Real Estate and Auction Company based in Indiana, shared real-time sales results, to help indicate how the pandemic is affecting farmland prices.

“Licensed in 29 states, Schrader conducted the first online, multi-tract auction on the internet simultaneously with a live auction back in March 2000. Today, due to COVID-19, more sellers have been taking advantage of Schrader’s ability to provide simulcast bidding as well as timed online sales.”

The DTN article explained that, “Schrader said there are several factors contributing to recent land prices like tight supplies, favorable interest rates and 1031 exchange money. Also known as like-kind exchanges, the 1031 exchange money has been playing an especially important role in motivating buyers as there is a financial impetus (avoiding a premium on capital gains for those funds) to reinvest within the limited timeframe (180 days to close).

“Farmland prices continue to be location dependent and are tied to better quality land, Schrader said. Over the past decade, a shift in who is buying farmland has also helped support the market.

“‘From 2004 to 2005, about 40% of buyers were investors and 55% were operators,’ said Schrader, referring to a data-set showing buyers of Iowa farmland. Beginning around 2010, those statistics show existing farmers becoming the dominant buyers, at 70% to 80%.”

The DTN article added that, “Schrader shared recent large-acreage sales by his company, which showed strong prices for row crop farms from the last quarter of 2019 and into the first quarter of 2020.”

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