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Everyone knew $7 corn could not last forever. Even as land prices topped the $10,000-per-acre mark in parts of the Midwest, there was that nagging voice asking, "What is an acre of ground worth when the value of the commodity it produces drops by half?" Murray Wise, head and founder of Murray Wise Associates, based in Champaign, Ill., believes cash rent rates will be the key to where cropland prices go in 2015.
Most land appraisers and farm managers across the country agree. Here's a look at what the next 12 months could hold in store.
DISCOUNTING THE MARGINS
Jeffrey Hignight is a farm manager with Glaub Farm Management, in Jonesboro, Ark. He believes the land market is headed for a plateau but doesn't anticipate any major corrections for good-quality cropland.
"Looking at the Delta region, land prices have not gone up as dramatically as they did in the Midwest, so there is not as much to lose. Changes in farm policy and lower commodity prices, however, lead me to believe a correction is due," he said.
Hignight expects more marginal land will come onto the market, and some lower quality ground may fall out of production. In the South, loss of direct farm payments will have a financial impact on rice and cotton producers. (www.glaubfm.com)
LIVESTOCK LEADS THE LAND MARKET UP
South Dakota stats from the USDA's Land Values 2014 Summary show a particularly heady increase in cropland values -- 21%. Even better were jumps in pasture prices, knocking on 30%. When it comes to the livestock side of agriculture, Shawn Weishaar said producers are optimistic.
"Cow/calf producers are very upbeat," said Weishaar, an independent appraiser based in Lemmon. They have lower feed costs, they are looking at record checks for calves they sell this fall, and, barring any major upheaval, they are doing quite well," he reported. That said, he doesn't see any reason why land prices here would start heading down in the next 12 months. (www.weishaarsales.com)
GRASSLAND AND CASH ARE KING
Keith Carlson, president and general manager of United Farm and Ranch Management, in Lincoln, Neb., called the demand for grass "terrific" given record cattle prices. The state saw a 40% leap in pasture prices in the latest USDA land value report. Cropland eked out just a 6.6% increase.
"Unless something unexpected happens in the cattle market, I don't see any reason to expect a correction on grassland values. If anything, over the next year, they'll just go higher," Carlson said. "But if corn and bean prices stay low, and the glut from this year's harvest gets added to another bumper crop in 2015, I would expect cropland values to drift some lower."
He believes land prices have essentially leveled and not fallen because of a limited supply of land for sale. Carlson expects marginal or poor land will lead any downturn. (www.ufarm.com/lincoln-nebraska)
RECREATIONAL LAND STAYS STRONG
In Alabama, agricultural land values are less about commodity prices and more about how well the general economy holds, said Howard Haynie, head of Howard W. Haynie and Associates.
He said recreational end users are influencing rural land prices, with ag values closely tied to income and population growth. There is no indication of a downturn ahead.