The Land Market: Smoldering Campfire to Roaring Wildfire

Prior to the Fall of 2020, the economic fundamentals influencing land values were quite different than those we are experiencing today.  This time period was overshadowed with volatility and uncertainty.  Just six months prior, the equities market fell dramatically in reaction to the economy being impacted by the pandemic which then prompted immediate government intervention.  

By Fall of 2020, over $5.25 billion of Paycheck Protection Program (PPP) loans were approved in addition to the first rounds of Economic Impact Payments being disbursed, leaving many in the economy wondering when stability might return.  Of course, the economy looked very different for many folks across the nation, but for those rooted in agriculture, the smoldering campfire coals suddenly turned red hot.

Farm and ranch land has always been a desirable asset to own for its relatively safe and resilient income streams over time, which has attracted investors from all walks of life.   Commodity prices (specifically corn and soybeans) began to accelerate through the end of 2020 creating an economic environment where many land owners and operators now considered and calculated potential land purchases that were not feasible just months prior.   Farmers and ranchers are always looking to expand – whether it is for additional feed production acres for their livestock or additional acres for manure application, a beginning farmer trying to start a business or a multi-generational farm family looking for opportunities to support their next generation.

In addition to farm owners/operators looking to expand, more competitive buyer adversary groups emerged since 2020.  Investors from the immediate locale to those absentee institutional land buyers have made aggressive advances to boost their land holdings.  Many purchases were still driven by the economic fundamentals of the return on and the historical return of these investments.  Simultaneously, farm and ranch land became an attractive purchase for Americans who saw their disposable incomes rise while their investment accounts rapidly fluctuated due to the pandemic uncertainty.

As interest rates continue to be at historic low levels and commodity prices hold steadily at multi-year highs, pressure mounts for farm buyers to secure more acres.  Competition is red hot!  A quick review just in the southwestern portion of Minnesota, indicates the list of sales is extensive and reflect the strong increase in land values over this time period. Below are some highlights.

Nobles County:

• December 4, 2020 land auction near Adrian, MN: 80 acres sold to local farmer for $11,350/acre when the next highest sale was a private transaction sold to large area farmer/investor for $9,582/acre a year prior.
• November 9, 2021 land auction near Reading, MN: 80 acres sold to local farmer for $12,250/acre when three other sales within the last month in the county sold for over $11,700/acre.

Pipestone County:

• December 8, 2020 land auction near Pipestone, MN: 140 acres sold to local dairy farm for $10,000/acre when the next highest sale was an auction sold to area farmer for $9,300/acre nine months prior.
• November 2, 2021 land auction near Pipestone, MN: 77.5 acres sold to local farm family for $12,000/acre with another sale in the county selling for over that amount two months prior.

Murray County:

• March 10, 2021 land auction near Currie, MN: sold to local farmer for $9,478/acre when the next highest sale was an auction sold to large area farmer/investor for $8,700/acre eighteen months prior.
• August 8, 2021 land auction near Slayton, MN: sold to large area farmer/investor for $10,650/acre which set a new high for the county since Fall 2013.

 The land market fire continues to burn hot through the end of 2021 with no signs of cooling off in 2022.