“We’ve seen a lot of people who are looking at farms for a stable, anchor piece to their portfolio,” he said.
Institutional investors, in the states where they are allowed to buy land, have purchased about 5% of the farms up for sale.
While quality cropland in the “I” states may be leading the pack in year-over-year increases, all segments of the land market are hot right now.
“In East Texas, our sales of timberland are increasing as sellers and buyers get more active. Ranchland prices in the state are strong as demand grows for that type of investment. Good Delta cropland continues to strengthen. Western Kansas dryland farms are selling at prices not seen for almost a decade,” said Paul Schadegg, Farmers National Company sales manager for Nebraska, Kansas, Oklahoma, Texas and Arkansas, in a press release.
Hensley said the recreational land market has been counterintuitively strong.
“When the general economy is struggling, typically, so is the recreational market,” he said, adding that recreational land is a luxury good just like condos and boats. “What’s been a little different this year with recreational land is the desire to be far away from other people.”
Dickhut agreed, adding that they’re seeing more people looking for a rural acreage so they can have a place to go outside of the city or go hunting.
Dickhut expects the supply of farmland on the market to remain low in 2021 since it’s really only inheritors, estates and non-operating landowners that are selling, although Hensley said the latter are reconsidering sales given the amount of volatility in other investment opportunities. He anticipates stronger farm finances, which will avoid the need for banks to force sales, as well as active demand by both farmers and investors.
The one unknown for 2021, Hensley said, is tax policy and whether Democrats will try to make changes to things like the Section 1031 exchange, capital gains and estate taxes.
“Looking ahead, if nothing unexpected happens to challenge the current land market, land prices will continue to firm up in 2021,” Dickhut said.
Katie Dehlinger can be reached at Katie.Dehlinger@dtn.com
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