Buyers of U.S. farmland appear undaunted by falling grain prices, paying top dollar for prime parcels coming up at autumn auctions although showing a more cautious tone than in recent years, farmland auction participants said at a sale last week.
"It's more dependent on where a farm is located than the general land market. The person the farm is near matters more than the type of farm," said Bruce Huber, an Illinois real estate broker who handled a sale in central Illinois last week. "Last year, it was just up, up, up."
If the sale of the 535-acre (217-hectare) grain farm in Carlinville, Illinois, for $14.5 million is any indication, farmland values in the most productive areas of the grain belt will stay steady during harvest, the traditional season for farm land auctions.
The farm in question, which included grain storage facilities for more than 4 million bushels, was sold in seven tracts with the top parcel of 200 acres bringing in $13,600 an acre.
"We decided $13,000 was our top dollar. We exceeded our expectations. But I'm glad we did it," said David Fullington, a local CPA who organized a partnership of farmers to make the successful bid for that parcel, which will be farmed by one of the buyers' sons in the coming year.
The sale price was as strong as a year ago when corn was at $8 a bushel versus the $4 being paid today. Corn prices have been the catalyst for sky-high U.S. farmland values in recent years.
Why the strength? The usual reason: the neighbors wanted the farm.
"We wouldn't have bought this if we didn't own other land," said Fullington, who said top grade land four years ago had been selling for $4,000 an acre. "It would have been a poor investment for somebody to go out and buy land for the first time."
Huber said he had seen a common theme at this autumn's grain land auctions in Illinois, typically the nation's number 2 corn and soybean grower behind Iowa.
If the farm is in the right spot, and the land is good quality, farmers are paying top prices and quickly - the 200-acre parcel, a $2.72 million sale, was done in 15 minutes, Huber said.
But if those factors are not present, sales go slow and often disappoint sellers.
"There is more variability this year," he said. "If you want $13,000 or $14,000, you're going to sit on it for a while. A year ago, that wasn't the case."
There is a wide audience for farm land prices this season. Federal Reserve policy makers, farm bankers who use land as loan collateral, seed and fertilizer dealers and equipment makers like John Deere are closely watching land sales as an indicator of future farmer spending at a time grains prices - if not revenues, given higher yields - have fallen back.