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Extension Regional Office 1527 Prairie Drive Worthington MN 56187 Phone: 507-372-3906 Fax: 507-372-3911 Email: bauxx003@umn.edu
levels, 2010 and 2011 were better and 2012 will probably continue this trend of good farm profits with better good corn and soybeans yields than expected with dry summer and record prices. Many hog and dairy producers experienced a tough year in 2010 many with losses instead of profits with poor prices for their commodities and high feed costs. In 2012 high commodity prices will again have a negative effect on livestock producer profits. If the average farmer is profitable, this would add local demand for the land from farmers. Interest rates continue at historically low levels and land rental income is comparable or larger than what an investor can earn from treasury bills, bonds or a certificate of deposit at financial institutions. The stock has market rebounded significantly since its low in March of 2009 but was up and down in 2012. The 1031 exchange is for farmers or property owners who have land in an area of increased value due to location to city or development and rather then pay taxes on large gains from the sale of land they purchase like property or other farmland at a more reasonable price elsewhere, which increases rural farmland demand. The aftershock of the recession and the real estate market has slowed this impact in 2012. The reason for the increase in farm land sales prices is a combination of all of these factors. If you would like a copy of two page document on the trends in farm land sale prices, contact your local county extension office at any of the fourteen counties listed above. How high can farm land values go? Supply and demand will determine this. The simple return on investment which is determined by rental rates will determine how competitive farm land is compared to other investments and this will determine a value for farm land. The government programs have an influence as well. If interest rates rise or farm rental rates fall, the value of land is sure to be affected in a negative way and that will cause a decrease in land values, but as long as these factors do not occur, the price of farmland will continue to climb.