Farmland for Thanksgiving
The American Farm Bureau Federation’s (AFBF) publishes the cost of a Thanksgiving Dinner every year. For 2017, the AFBF estimates the lowest Thanksgiving Dinner cost in five years; $49.12 for ten people. (If your family is anything like my family, we add 20%+ on to the annual figure! But whether 20% or 100% higher, the cost is still lower in 2017 than it has been at any time in the last five years.) While cranberries, stuffing, pumpkin pie mix, and whipped cream are more expensive, turkey, yams, bread rolls, and milk have all dropped more than enough to make up for those increases.
How does this relate to farmland? Agricultural commodity prices have generally been falling since 2013. 2017 was no exception. Since farmland prices are based upon the value of what the land produces, the agricultural commodities price slide is a farmland price slide.
How will prices rise? The only way for farmland prices to increase are from agricultural commodity price increases. Agricultural commodity prices increase when there are supply problems. Supply problems come from bad weather, natural disasters, increased demand in other countries, and other problems.
When will prices rise? Your guess is as good as mine. The real question is if 2018 be a good or bad weather year?
What does all of this mean for people involved with farmland or who want to be involved with farmland?
Potential new farmers and farmers who want to expand will love these low farmland prices. However, existing farmers know prices are low and are holding out against selling unless they need to sell. While it never makes sense to overpay, do not be afraid to make a competitive but fair offer. A note for farmland investors with tenant farmers- this may be your market bottom!
Be warned: Lenders are wary of farmland right now. They know that they have been lending money against a (for now) depreciating asset. Expect tighter mortgage qualification requirements and higher down payment demands. If possible, try to live on the land you want to purchase. Lenders always look more favorably upon owner-occupied properties over investment properties.
Farm sellers, hold on tight. It will continue to be a wild ride into the foreseeable future.
Keep up with your land and farm. There are ways to stage land and farms just like standard single family homes. Groom trails and make it easy for buyers to explore the property. Take numerous pictures. Include drone photography of large parcels. Be sure to have a survey on file. It also never hurts to have well, septic, and municipal and county contact information handy for your buyers.
Be sure you are legal! We all know that happens on many farms, especially in more lax counties. But the time for an unregistered manure pit, a barn full of old hazardous agricultural chemicals you’ve been meaning to get rid of “one of these days,” or a barn in danger of collapse is not when you want to sell your property. (If at all possible, let’s talk first before you just tear down old barns!)
My name is Mike Kwiatkowski and I am an Auctioneer, Realtor, and Broker Associate with Coldwell Banker Residential Brokerage of Brookfield, WI. If you want to talk buying or selling a farm in southeastern Wisconsin, I am just an email or phone call away! You can reach me at firstname.lastname@example.org or at 414-207-2938.
Thank you and have a Happy Thanksgiving!