Robust agricultural prices have led to strong farm balance sheets. That lure of high profits has generated anecdotes of some eye-popping sales of farmland and whispers of a farmland boom for a couple of years running.
But that’s only the wind blowing in your ears—there is no widespread evidence of a speculative boom, says a recent report by Steven Taff and Minnesota Land Economics, an online data warehouse maintained by the Department of Applied Economics at the University of Minnesota.
The price of land has risen considerably since 2000, even after adjusting for inflation, including a strong rise from 2007 to 2010. While farm income wasn’t particularly strong during the first half of that decade, farmers saw some of their best years during and after the recession.
But the lack of unbridled speculative bidding can be seen in the fact that the number of sales has dropped by 50 percent since 2007, and the number of acres sold has fallen even more—evidence that farmers are perfectly happy to take profits from fields, rather than from land sales (see chart). That was particularly the case last year, when the number sales, total acres and median prices all declined compared with 2010.
The MLE database goes back to 1990 and includes some 54,000 farmland sales covering 6 million acres. The data come from state Department of Revenue compilations of property transactions, which are reported annually by county auditors. The distribution of those sales, broken out by year, offers an interesting timeline of farmland sales and values in the state over this period (see video at bottom; note that land values in the video are not adjusted for inflation).
Taff points out that ag land near the Twin Cities, other large cities and high-amenity locations has “always been affected by factors other than agricultural,” including recreation, housing development and retirement. “This results in some parcels selling for far more than we might expect if we simply focused on their farm income potential.”