Spring Gut-Check: Auction Results are Consistently Strong, with Healthy Underpinnings.
Now that the first quarter is behind us and we’re getting closer to planting time, it can be revealing to step back and assess the health of the farmland market.
The year started with a bang, as our first major auction of farmland resulted in a $10.2 million sale price on 1,371 acres. Tillable land in Minnesota and Iowa brought an average of $8,800 per acre, with a 144-acre tract selling for $10,290.
That auction also was noteworthy because it attracted a wide group of bidders – 78 registered bidders in all -- from five different states. And the buyers included investors as well as operators.
Of course, it’s one thing to get off to a great start. But the next question is how deep the demand runs. How much staying power would it have? Would demand hold up for land of different quality and in different locations?
In early March, we faced another test: the auction of 2,117 acres in Faulk County, South Dakota. The land attracted 37 registered bidders and sold for more than $8.7 million. Buyers paid prices of $5,100 per acre on 480 acres and $4,400 per acre on another 304 acres.
The strength wasn’t limited to live auctions, either. We’ve been seeing active bidding and healthy sale prices on our online auctions as well. A Minnesota farm auction of high-quality land brought $5,551 per cropland acre, with an investor emerging as high bidder. Another 160 acres in North Dakota on lower quality land went for $2,326 per acre – a great price for the land and location.
Our most closely watched auction was probably that of 2,050 acres of high-quality land in Lancaster, Wisconsin. On March 28, the land sold in a $17.6 million auction, with a number of tracts exceeding $9,000 per acre. More than 130 bidders came out for the live auction, and bidding was so active it took two hours to get it all sold.
Just a few days later, we saw yet another big turnout in Peever, South Dakota. That auction of 1,162 acres attracted almost 40 bidders and resulted in a sale for more than $4.48 million.
Encouraging signs
These and other auctions now provide enough recent history to confidently assert that we’re in a favorable market climate. Here are some of the most encouraging signs:
Good interest by local operators. Farmers in the area generally know the land, the local market, and the profit potential better than anyone. In addition, they are often motivated because they have few opportunities to buy land and expand their operations.
Growing investor interest. Our larger auctions are attracting the attention of large and small investors alike. These include very sophisticated investors who study the likely profitability based on interest rate and commodity trends, and base their bids on the anticipated rate of return over the long run. This makes them a stabilizing force in the marketplace, providing a critical source of demand.
Large auction-day crowds. The most basic rule of auctions is that – all things equal – more bidders translate into higher sale prices. And we’re getting substantial crowds, resulting in great energy in the room and intense competition.
Good demand for related assets. Auctions of machinery and other farm-related assets are a good indicator of the health of the overall agricultural market.
As always, there are question marks on the horizon. Interest rates are going up, and many farmers have expressed concerns about international trade negotiations. But with volatility returning to the stock market, we believe some investors will seek the refuge and long-term stability of land. Nobody knows the future, but for now, the trend is favorable
