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HERTZ FARM MANAGEMENT'S PRESIDENT ON WHY FARMLAND PRICES REMAIN HIGH
Sep. 3, 2024
by Doug Hensley, President, Hertz Farm Management
The farmland market across Iowa (and the Midwest) is resilient. As we've watched the grain markets grind lower almost all year -- to below breakeven levels -- we have not yet seen land prices retreat in a similar way. Certainly, land sales are not making new highs. But sale after sale in the early summer months reminds us how valuable the opportunity to own the farm next door is.
What is it about farmland that makes it so sought after? Three simple reasons come to my mind:
1. Every farmer I know aspires to own land (and buy more). I know many landowners who patiently position themselves for decades to make a move when a specific farm becomes available. For some, the timing really doesn't matter. They will be ready when the opportunity presents itself, regardless of other factors.
2. This somewhat mutes the effect of grain market volatility. Yes, the price of corn in early July is below the cost of production, but we all know that the entirety of last year's production isn't being sold at these price levels. So, what we see today in the grain markets does not tell the entire story.
3. If an opportunity to buy the right farm surfaces, many land buyers can easily sacrifice other capital expenditures. I've often shared that it's easy to delay a tractor or combine upgrade until later if the right farm acquisition is available. It's a simple matter of capital priorities.
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