Premium farmland is in short supply in Nebraska and Iowa, according to the nation's largest farm and ranch seller, with recent prices for the best ground reaching $15,000 an acre in the Cornhusker State and higher than that to the east.
Omaha-based Farmers National Co., which has about 100 Omaha employees and sold about $640 million of farm and ranch land in 2012, says there was a large sell-off last year.
“In the last three months of last year, we sold more dollar-wise than in 12 months,” said Jim Farrell, Farmers National's chief executive. “We sold $360 million worth of real estate.”
That has left buyers competing hard for what is left, amid record-low interest rates that make traditionally safe investments such as U.S. Treasury notes and bank deposit certificates unappealing. The Farmers National June report shows average prices in its multistate sales area up 20 percent from a year ago.
Prime irrigated ground in York County, considered a bellwether for the best Nebraska farmland, has gone for as high as $15,000 an acre recently. Prices in Iowa have gone higher; Farrell said he knows of a recent Iowa sale that fetched almost $19,000 an acre.
Farrell said most recent buyers have been farmers or ranchers, with only about 10 percent to 20 percent investors. Demand remains high, he said, because older and prosperous farmers see few safe alternatives for cash.
“We are seeing 80-year-old farmers pulling their cash out of the bank to buy ground,” Farrell said. “If interest rates go back up, you are seeing 4 percent CDs, it will be a different story.”
At an auction last week for 120 acres in Dodge County, auctioneer Ed Olson of Olson Pearson Auctions & Realty tried to start the bidding at $9,000 an acre; none of the 70 or so people gathered in the Scoreboard Cafe in Uehling were impressed, so Olson was quickly reduced to barking out $5,000 an acre.
“This is a good farm for that, boys,” Olson intoned before restarting the lilting sing-song of the auctioneer.
The farm eventually went for $7,500 an acre to a local farmer, Olson said.
He said he and partner Dave Pearson have sold ground lately from $5,000 an acre to almost $12,000. When asked about historically high corn and soybean prices that have been supporting such land values, Olson recited a familiar farmer's bromide about any 10-year stretch.
“Farming is three good years, three bad ones and four break-even,” he said.
Ryan Palmer, a commodities analyst at Omaha-based Brugler Marketing & Management, said premium farmland will retain more of its value if crop prices decrease than will property with lesser productive characteristics.
“Premium farmland still pencils out to be a great investment compared to keeping the money in the bank, especially when you can do a better than average job of marketing the crop,” he said.