Panelists weigh-in on land sales, trends

BLOOMINGTON, Ill. — From sale trends to who’s buying, panelists covered a myriad of hot topics during the Illinois Society of Professional Farm Managers and Rural Appraisers’ recent Land Values Conference.

Luke Worrell of Worrell Land Services, Jacksonville, and conference chair, served as moderator.

Panelists were Liz Strom, Murray Wise Associates, Champaign, and ISPFMRA president; Deanne Phelps, Compeer Financial, Sycamore; and Jason Lestina, Land Pro LLC, Oswego.

Here are some of the topics the group covered.

Worrell: Foreign ownership has been in the headlines. I’ve had hardly any correspondence with foreign interests in the 17 years I’ve been doing this. I think I’ve had one meaningful conversation, maybe two, but it certainly wasn’t China or some of the big four. Mine were Argentina and Denmark. Have you seen any interest from international buyers of late?

Strom: There’s always interest in purchasing farmland from funds that have interests outside of the U.S. and I don’t think that has changed. It’s pretty much the same as it always has been, but I think the overwhelming majority of farms are sold to people who live within 40 miles of the farm.

There’s always that underlying interest, but it’s not a huge part of the market sector. It’s honestly pretty small.

Lestina: Foreign investors are a very small portion of people buying farmland in the U.S. There are some funds and groups — Argentines, Germans — that are buying, but it’s small amounts.

I have not had any experience or exposure to any Chinese investors. I know that’s hot button and what a lot of people want to know if they’re buying our farmland. I have not experienced that. I don’t see that. I think it would be a very small portion.

Worrell: Most of the studies show that a large majority of the buyers are typically owner/operators or what would be considered local money/local investors. Has that changed in the last 15 months or is it still predominately farmers and local investors buying farmland?

Strom: I would say that that has not changed overall. The majority of people buying are farmers. I pulled data from Murray Wise Associates of what we sold in 2023 and 2024 because I, too, was curious on who was buying farmland.

The majority was either farmers or local investors. It could be a doctor that lives in town who owns some farmland nearby and wants to add to his portfolio. The majority of buyers are farmers, somebody who knows the farmer or a local investor.

Worrell: What would be the biggest difference in the land market that you’ve noticed between the end of 2022 and now?

Strom: The obvious answer is commodity prices. Those have obviously come down in the last 15 months, and farm income follows that, as well.

The other thing I would say as far as the real estate market is that the volume of sales has really decreased. We had a lot of farms come on the market in 2021, 2022, and we’re starting to see that slow up a little bit as we head into 2024.

What I’ve also noticed is back in 2022 and early 2023 it seems like we saw a lot more sales that were hitting $20,000-plus per acre, and it seems like we’re still seeing them, but we’re seeing less of them as we go into 2024.

Worrell: Anything specific in the first three months of 2024 that gives you a strong sense of where we’re going to go for the rest of the year in terms of land values? Have you noticed any big difference in these first few months of 2024 as opposed to last year?

Lestina: As far as land markets, I feel like there’s a low supply right now, probably the lowest we’ve seen in a long time. My observation is the they’ve had to work harder to get bids and it seems like there’s a larger variety swing on where that property’s going to end up selling for.

A year or two years ago, we said this is going to up here at this level. Some of them are still hitting those levels, but I think we’re seeing a little bit more not quite getting to where we thought they would be.

Especially if there’s some drainage issues or non-tillable, I think we have to work harder to get to those higher prices and starting to see possibly a little bit of a softening. I think we’re starting to see a few more listings coming out, and not quite as many properties coming to auction.

They’re going back to the more traditional listing method, especially for the little bit lower quality properties, the ones that have drainage problems and non-tillable. When the market was hot the last couple of years, they came to auction, but they’re now shifting back to private listings.

Strom: The other thing that I have noticed is we’ve had some recent auctions and it seems like farmers still want to buy farmland, but they just feel like the wind has been taken out of their sales.

They have a little bit less excitement about maybe purchasing a farm that’s a little farther outside their farming circle. Don’t get me wrong, they’re still definitely buying farmland, but they just seem a little bit less enthusiastic than what they did before.

Worrell: Since the end of 2022 have you seen more, less or a steady amount of appraisal work?

Phelps: In the first quarter of 2023, we definitely saw a slowing of appraisal requests coming in. They started to pick up more in the fall and winter, but overall in 2023 we had less requests than we did in 2022. As 2024 is starting, we’re having more than we last year at this time.

I think a lot of it, at least in my area, is we saw less sales in 2023. So, we were not needing the loan appraisals like we have in the past.

Worrell: What is the biggest challenge you face in March of 2024 in terms of farm appraisals?

Phelps: The biggest challenge always is we’re capturing the current market. So, we want to be capturing it in real time. The hardest part is having enough data and enough sales to indicate if the market is actually changing, whether that’s going up or down.

You may have that one sale between brother and sister or a sale between father and son, knowing the back story of those, knowing maybe that’s not where the market is, but just trying to get all that data in determining which direction we’re moving.

Worrell: Do you currently get more solicitation from wind or solar projects?

Strom: It used to be wind. Now it seems like there are a lot of solicitations coming in on solar.

Lestina: It started out wind and the solar has caught up and taken off. I get a lot of solar. It’s just hard to know who the company is and if they’re legitimate.

It seems there are a lot of them out there just trying to get anyone to lease acres, and they have no intention to go through with the project, they just want to get the acres leased and then sell them off to another company.

You’ve just got to do your due diligence if your client is interested in it, and really work through who they are and what they’re offering.

Phelps: Appraisals that I have done that have solar options on them, usually those payments are pretty minimal and they’re not making a big difference in the value of that farm.

It’s not making a difference until they are actually built and you’re getting the high dollar leases. That’s when it starts to make a difference.

Worrell: What is the biggest obstacle in the land market right now in terms of maintaining this level of value were at? Is it lower commodity prices/farm income, interest rates or other factors?

Lestina: A lot of it is driven by commodity prices/farm income. I think we’re having a little bit more of a plateau right now and we’re not as optimistic as we were several years ago when there was higher farm income.

So, guys are being a little more cautious and I think they’re being cautious and want to see how this year plays out. We’ve have to wait a see where commodity prices go this year.

Strom: I would share the same sentiment about commodity prices and farm income. That’s my largest concern because at the end of the day, the farmer has to make money. If the farmer is not making money, that has impacts on everything else.