Farm Industry Market Trends Update – Late Fall 2021
November 2021
Demand Continues
They say every growing season is different and as harvest is upon us, that couldn't be more telling from a weather and price standpoint. Yet, it seems every area has had a different set of obstacles to deal with this growing season. It was about a year ago when commodities started climbing upward. The machinery market reacted instantly, telling us that producers were holding off on making purchases until some profitability was built into their operation. This spring and summer brought an appetite for machinery like we haven't seen before due to the short supply of new equipment coming out of factories. Couple that with increased potential for on-farm income; it's no wonder we have seen many record prices on used equipment at auction. Farm machinery accounted for 92.2 billion dollars in sales for 2020 and is on a path to hit 113 billion by 2025 at a 4.2% annual increase. Auctions have a unique relationship with the retail market, and one cannot exist without the other. At this present time, we are seeing used equipment sell for close to retail price because producers simply can't find what they are looking for on an equipment lot. As we move through the fall quarter of 2021, expect more of the same trend. Interest rates are still low, and the supply will not have recovered yet to fill the demand.
Land
With the run-up in commodity prices, you would be hard-pressed not to find an article on farmland prices by reading an agriculture or investment publication. In the auction industry, we have seen the trend in real-time as it started last fall. From 2014 to the summer of 2020, we saw values slightly decrease and eventually become flat. Along with the decrease per acre value, the number of transactions decreased exponentially. For example, in 2012, Minnesota had the highest number of farmland transactions with 2,880. The next highest was the year 1990, which had 3,140. The transactions declined down to 1,264 in 2020, that's a 56.2% decrease. In short, this decrease in transactions and lack of farmland available to buy in these eight years has been a factor that has held prices from a more considerable decline. We also saw a pent-up demand during this time frame. Farmers were willing to buy farmland that wasn't even near their operation. The thought process was to acquire farmland, rent it out, and then when a parcel within your area is obtained, 1031 exchange the two properties.
Farmland is as strong as ever and looking for new highs. USDA posted the average increase from 2020 to 2021 in value for different parts of the country. The corn belt, by far, had the highest gains. Here are some examples:
Iowa 8.9%
Minnesota 9.8%
Illinois 8.2%
South Dakota 11.9%
Nebraska 13.8%
Wisconsin 10.7%
Indiana 9.5%
North Dakota 6.7%
Farm profitability is forecasted to increase by 19.5% in 2021. Coupled with the interest rates at historic lows and strong commodities, the trend will continue to be strong.
Steffes Price Guide
This is the fourth catalog to be put out this year by Steffes. They are all important, yet this catalog stands above the rest as we get to introduce our new pricing app – Steffes Price Guide. It is something I am personally passionate about. We have used this app internally for a few years, and now we are launching it to the public. The app is free and will include pricing on equipment sold by Steffes with the ability to search by year, make, and model. It will give you the date sold, location, and what the final selling price was. My hope is that you find it as valuable as I have in tracking used equipment prices. Simply search "Steffes Price Guide" in your Apple App Store or Google Play Store and have fun searching through all the sold prices!
Ashley Huhn | Site Leader
Litchfield, MN
Steffes Group, Inc.
