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Have land prices hit the ceiling?

Over the last several years – farmers have seen land prices increase significantly.  Ken Springer, assistant vice-president at Farmers National Company says since 2006 there has been double a digit appreciation for land values – until this last year. “Throughout the corn and soybean areas it appears we’ve bumped the ceiling on land values,” he says.  “We haven’t seen a drop-off like we did in the 80’s. But in some places we’re seeing about a 10 to 15 percent reduction in land values.”

But with the decrease in commodity prices, Springer tells Brownfield that land prices are still relatively high.  “From the farmers side – a lot of them had to lower their expectation on rate of return,” he says.  “They’ve had to lower their expectation of returns to 1 percent or 2 percent at the best.  While the investors have expectations closer to a 3.5 percent rate of return.”

But, he says, there doesn’t seem to be a shortage of investors looking to purchase farmland when it becomes available.