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HADDONFIELD, N.J. (DTN) -- The bloom is coming off Corn Belt farm real estate, and that's just fine with buyers like 70-year-old Tony Kriegel of Brooklyn, Iowa. He views farmland as a long-term investment, something he hopes his 12 children will never sell.
Kriegel and two sons have purchased four farms since last fall, all negotiated privately after no-sale public auctions. They had to go as far as 30 miles from their home farm in southern Iowa to find deals, but they spent only about $110 per Corn Suitability Rating point on their last two properties, down from about the going rate of $150 per CSR point just a few years ago, he said.
"It's really a reflection on the grain market, with nobody wanting to put their neck out right now," Kriegel told DTN. "Land might go down more, but we'll be all right if corn doesn't go below $3 and soybeans below $8." For one thing, he's putting 60% equity behind the land purchases, double what he contributed during his "young tiger years" of the 1980s.
A new Peak Soil Iowa Farmland Index -- based on actual farmland transactions collected from 50 Iowa counties -- also confirms that downward real estate trend. The index tracks a moving-average of sales on a weekly basis, then converts results to the value of "good"-quality farmland, with an average CSR rating of 60. Beginning Wednesday, DTN will post the most current weekly index of Iowa farmland prices on its Farm Finance page (under the Farm Business tab).
For example, based on hundreds of public records in the Peak Soil Iowa Farmland Index, "good"-quality Iowa farmland plateaued at about $9,154 per acre in May 2013 and sold for $150 to $154 per CSR point. By April 22, 2015, the same values had plunged 16% to only $7,694 per acre. CSR points were selling for an average of about $130 apiece. (A handful of other states, including Illinois and Indiana, also have rating systems, although none are exactly comparable.) According to Peak Soil, the value of Iowa farmland has slipped for the fifth week in a row and is off 5% since Jan. 1.
Unlike housing markets, there's no Zillow.com or S&P/Case-Shiller home price index to monitor farm real estate. Insurance companies and pension funds track the value of their farmland investments, but their quarterly index reflects California specialty crops more than Midwest farmland.
Because the Peak Soil index is updated weekly, founder Paul Kanitra considers it a superior barometer of Corn Belt trends, more so than the annual farmer opinion surveys conducted by USDA, or even the farm lender surveys conducted by some Federal Reserve districts on a quarterly basis. For one thing, the data is more impartial than opinion surveys. Peak Soil includes both auctions and private transactions, which may not be as widely publicized but more indicative of the market. Also, when farmland markets begin corrections, quarterly surveys may be months out of date by publication. He hopes the index will provide landowners and investors with an early warning system of real estate trends.
"The biggest risk isn't the crop growers produce, but the land they own," Kanitra said. Eventually, he sees an opportunity to expand the index to other states and countries and to develop futures contracts that trade on those values, much like indices were developed to hedge interest rates with U.S. Treasuries.