LINCOLN, Neb. (DTN) -- If it seems everyone you know is showing up to local ag land auctions, it should come as no surprise.
A new report from Farmers National Company, one of the largest farm and ranch management and real estate companies in the country, said there are more potential buyers than sellers in the market.
That lack of balance between demand and supply is helping land markets remain relatively stable despite a downturn in the ag economy.
"Across the industry, land listings are down, on average, 25% from the active and accelerating value market experienced between 2020 and 2023," the company said on Monday.
"The principle of supply and demand fits into the current land market, as many landowners understand the long-term appreciation of land value while providing an annual return on that investment."
Farmers National Company said that this past fall alone, it marketed $223 million of land value for clients across the Midwest in the past three months.
The company said it conducted 123 sales in the fall months of 2024 through public auction. Real estate activity moving into the first quarter of 2025 "remains brisk," FNC said, with an above-average level of auctions and traditional listings being negotiated.
"Despite the pressures created by lower net-farm income, declining commodity markets, higher interest rates and increased input costs, land values have remained quite stable across the Midwest," Farmers National said in a news release.
"While most university and industry land value reports published at year's end reflect a flat or slight downward trend compared to production expenses, the stability in those values reveals the resiliency of the land market and its ability to maintain the high values set over the past five years."
Paul Schadegg, senior vice president of real estate operations at Farmers National, said farm operators continue to be the primary buyers of ag land and will continue to be through 2025.
"There are many factors for buyer motivation, but much of it can be explained by mindset translating to demand," he said in a news release.
"Farm operators continue to be the primary buyers of ag land. Their mindset or motivation revolves around reinvesting in their farm enterprise, expanding operations and utilizing today's farm equipment fully. Location of land offered for sale also plays a large role in their decision making, as often this land has not changed hands for generations and once sold, may not be sold again."
REGIONAL LAND VALUE REPORTS
Farmers National also provides snapshots of how land sales are doing by region.
In Indiana, Ohio, Michigan and Kentucky, FNC said there continued to be a decrease in the amount of land for sale in the last half of 2024 compared to the previous three years.
Jay VanGorden, Farmers National area sales manager for the east region, said he has seen less farmer buyer interest as commodity markets have fallen and rainfall has been spotty.
"Even with these conditions, farmers and investor buyers are still looking to purchase land," VanGorden said. "With less land inventory for sale, land values have seen minimal price drops for highly tillable and quality soil-type farms in most areas. Farms with lower-quality soils, lower tillable percentages and poorer drainage have dropped off more significantly. As always in areas nearer high-population areas and urban development, land values can be higher for replacement properties when land is sold for development."
Ag land sales in Illinois and Wisconsin, however, have increased slightly, according to FNC area sales manager Nate Zimmer.
Many farms still are being sold at "historically strong levels," Zimmer said. Record-breaking sales, however, aren't as predominant as they were a few years ago.
"We've seen several auction 'no-sales' the past few months, which is a sign that seller and buyer expectations are not aligning as previously," Zimmer said.
"The real estate market has always been about location. However, the location factor and the strength of possible buyers nearby means more than ever."
Zimmer said when he's asked questions about the local buyer pool or overall farm quality, the method of sale is increasingly becoming the private treaty listing route as opposed to public auction.
"The current sentiment of most brokers in our area is that 2025 will bring about a tendency for land values to stabilize or decrease some," he said.
IOWA, MINNESOTA SALES
In Iowa and southern Minnesota, FNC said 2024 average land values declined from the record highs reached in 2021 and 2022, dropping 5% to 10% in the region.
Buyer demand has weakened for "poorly drained and lower-quality farms, while high-quality, highly tillable farms have maintained steady interest," the company said.
This sustained demand has sometimes driven auction prices for premium farmland to levels comparable to those seen two years ago, according to Thomas Schutter, area sales manager for Iowa and southern Minnesota.
"With the decline in buyer demand, alternative sale methods have become more common, particularly for lower-quality farms," Schutter said.
"While higher-quality farms are still predominantly sold through auctions, there has been a noticeable increase in the use of traditional listings and sealed bids for marketing farmland in some areas."
According to Steve Morgan, area sales manager for Kansas, eastern Colorado and western Missouri, agricultural profitability continues to be the main driver of the land market in the region.
Land prices in southwestern Kansas have seen retracement, mainly irrigated land because of the declining water availability in the area and the uncertainty surrounding the Southwest Kansas Groundwater Management District's future implementation of reducing allotments across the region.
A retracement is when there is a temporary reversal in the price of an asset that happens within a larger trend.
Morgan said eastern Colorado land prices have remained strong or stable with no marketable price decline.
Sales for top-quality cropland irrigated and pasture remain "strong" with active-buyer interest across the northwestern tier of Kansas counties, he said.
"Central and eastern Kansas is seeing high demand for pasture and rec (recreation) land, achieving top dollar," Morgan said.
"We have maybe seen a price decrease on lower-quality properties in south-central Nebraska, but the high-quality properties have not seen the same decrease."
NEBRASKA, KANSAS, COLORADO SALES
In western Nebraska, northwest Kansas and northeastern Colorado, area sales manager Cole Nickerson said neighborhood demand and land quality are the primary drivers in the region's land market.
"Land values have remained high in regions with strong cattle production, driven by record beef prices," Nickerson said.
"High-quality irrigated and productive dryland farms continue to command strong prices, reflecting recent trends. Quality grassland with good fences, ample water, and easy access have also maintained elevated prices."
There has been a slight decline in values for land with productivity or access issues, he said, and economic challenges in the corn and soybean markets have "made farmland more difficult to sell" in areas dominated by row-crop production.
Land values in eastern Nebraska and western Iowa have for the most part remained steady, Farmers National Company said, especially for high-production farms or in areas with a limited supply of properties for sale.
Chanda Scheuring, FNC's area sales manager for the region, said that as the agriculture economy has struggled recently, the land buyer pool has shrunk.
"This has led to properties with lower-tillable, or less-productive acres being the first to feel the pressure of higher interest rates and tighter profit margins," she said.
"Over the past six months to a year, these types of property have seen a slight reduction in value (about 5% to 10%) from the recent market peaks."
In the Dakotas and western Minnesota, the company said land values have been holding fairly steady.
Troy Swee, area sales manager for the Dakotas and western Minnesota, said the overall real estate market in his region has been "chaotic."
"Land values remain very strong in areas where not much land has sold, and the producers had an above-average crop in 2024," he said.
"However, in areas with less investor interest and where several farms have already been sold, land values appear to be down 10% to 15%. We have also seen substantially reduced bidders at our simulcast and online auctions. We often see about half the number of bidders as we did in the fall of 2022."
Todd Neeley can be reached at todd.neeley@dtn.com
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