Southern Minnesota farmland prices creep upward
Bill Weber, land appraiser at Luverne, Minn., says a good crop in areas that got rain, combined with grain prices that have risen because of drought in the region, has increased land values to near their peak levels a few years ago.
LUVERNE, Minnesota — It is a trying time for drought-stricken areas in the Dakotas and parts of Minnesota. But farmers in some areas have gotten rain and are seeing increasing land prices as commodity prices remain strong..
“I think we’re going to have a bit of a ‘weather market’ in this particular area,” said Bill Weber, owner of Jensen Management Service, Inc., at Luverne, Minnesota.
Jensen Management Service does real estate appraisal, brokering and management in a wide swath across southern Minnesota. Weber’s clientele goes north to the Minnesota River and east to Rochester, Minnesota.
Rock County — the farthest southwest county in Minnesota — has been fortunate to pick up rains in an exceedingly dry summer. Most of the crops in the Luverne area looked good as of Aug. 5, 2021.
The area is strong in entrepreneurship around corn. Among other things, the community is home to a plant owned by Gevo Inc. of Engelvale, Colorado, operated by wholly-owned subsidiary, Agri-Energy LLC. The company on Aug. 4, 2021, announced its reopening after a 15-month shutdown, due to COVID-19 and other factors. Gevo is looking to hire up to a total of 30 employees. It uses corn to produce isobutanol, which is used to make “sustainable aviation fuel and renewable premium gasoline,” according to president Paul Bloom.
Weber started land appraising in the late 1970s, and remembers bank closures and tumbling farmland values in the 1980s. There were gradual land value increases, and then a quick rise.
Farmland prices in his home area of Rock County, Minnesota, topped out between the years of 2014 to 2017. As commodity prices declined, the land prices leveled off or even declined.
Now, things are on the uptick, especially in the past nine to 10 months, Jensen said.
In Rock County, recent sales in Clinton Township — the second township east of the South Dakota border and along the Iowa border — private land sales have been in the $12,500 to $14,000 per acre range, 69% to 78% of the peak price of $18,000 an acre.
Values had started an “uptick” even before this summer’s weather patterns. “I think we continue to see a strengthening of the market in most of the areas here in southern Minnesota,” Weber said.
Southern Minnesota land is affected by even higher levels across the border in Iowa, where land productivity is “essentially the same,” he said. Greater livestock numbers and some “very, very large crop farmers down there that are still ‘averaging’ the cost of their land at this point,” and willing to bid up parcels that fit into their operations.
Some land rents in that area had declined some, but those declines stopped this year, especially where moisture was adequate.
A regional vision
Weber recently completed his ninth term in the Minnesota Senate, and sees the whole spectrum of economic impacts on farmers. He is a member of the Senate Tax Committee and chairs its subcommittee on property taxes. He is also a member of the Environment, Natural Resources policy committee and on the Senate Rules Committee.
His state Senate district extends three counties north on the west edge of Minnesota. While rains have come in the south, it isn’t long before he drives north and sees drought stress. Farther north of his district, non-irrigated corn he’s seen from St. Cloud, Minnesota, to Alexandria, Minnesota, looks tough.
“Certainly, for a farmer, there is nothing more frustrating than to have a bad crop in a high-price crop year,” he said. “But it’s a situation that’s developing in much of the state.”
In those dry areas, Weber said, lending institutions will likely not want to lend money to support higher land values when cash flows are drought-reduced. But he adds there’s a “wide variation” among buyers.
“Many of our buyers are financially stable and have a good background in terms of having assets that can support additional debt,” he said.
Areas with very good land saw some downturns in land values but those were the first areas to pick up again.
“Where soil types are less desirable, are ‘lighter’ in nature, or have some incurable wetness issues, those values haven’t necessarily recovered to the same degree,” he said. “They could indeed have further pressure on them, depending on how this year actually shapes up,” he said.
Of course the government response to the drought will play a role.
A staunch Republican, Weber notes that when commodity prices were low last year, the Trump administration stepped up and “made the farmers whole” when trade tariff retaliations hit farmers disproportionately.
When farmers are doing well financially, crop input suppliers and machinery manufacturers “decide it’s their time to do well, as well,” he said. But when commodity prices decline, the input costs aren’t quick to follow.
“Right now they’re waiting for computer chips,” he said. "Manufacturing plants have lots of new vehicles, but they need new ‘chips,'” he said. “The supply chain is totally mixed up now, part of it because of COVID, and part of it probably because we’ve so reliant on international countries. And, you know, they’re not all friends of the United States.”