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3 signs farmland may be topping




Image courtesy University of Nebraska Extension



1. Livestock issues






2. Values vs. rent


"Comparing the recent percentage gains in value of agricultural land classes with the associated lower percentage gains in cash rental rates indicate a continuing pattern of lower rent-to-value ratios associated with all farmland classes," Johnson says in a university report. "At some point, the implied economic returns to land as a percentage of value can fall to a point where market participants say 'enough' and no longer bid values higher. Here in Nebraska, we well may be quickly approaching that point."

3. Inventory

There's another growing dynamic in the marketplace, though, one that farmers and landowners say could apply more downward pressure on land prices moving forward. Right now in some areas, it's a major "seller's market" for land. In some instances, there's simply no land going up for sale. When land does go to auction, the scarcity of supply causes more bullish pressure on prices. That, combined with the growing financial requirements to finance new farmland purchases, could cause prices to slip.

"In the 4-county area of Iowa I own my farms in, the banks are not writing any loans because there is currently not even 1 farm for sale within 100 miles of my operation. This is a first; in the past, there seemed to always be a few listed," says Farm Business Talk senior contributor rswfarms. "You would think this extreme shortage of Iowa farms for sale would have an influence on farmland values. But with not much sale action, it's hard to gather any data. I have heard of banks in my area requiring a 50% down payment or requesting a large chunk of your debt-free farmland as backing for a loan."

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