Article was written by Leigh Presley, Agriculture Extension Educator.
Originally published in the Kenosha News.
The saying goes that farmers are land rich and cash poor.
While calling any landowner poor might be a stretch, farmland is indeed is the most valuable asset on most farmer’s balance sheet. It’s also one asset that farmers try to hold onto as long as possible, even when farm income slides.
Tracking sales of farmland and farmland values can provide some insight into the farm economy. Farmers represent the majority of farmland owners and buyers, therefore farm income and farmers’ access to capital has a large influence on land values. Other factors like farmland productivity and environmental issues can also impact land values in a given area.
According to the Wisconsin Agricultural Land Prices Report, recently released by the University of Wisconsin-Madison Division of Extension, Wisconsin land values have generally been strong over the last five years, despite difficult economic conditions and substantial losses in the number of dairy farms.
The report provides a statewide overview of agricultural land values/prices across Wisconsin based on a statistical analysis of more than 8,000 actual sales from 2009-2019, including township-level data, land values versus rental rates, influencing factors, and implications for agriculture.
Recent trends in farmland value
2019 farmland values have shown some signs of depreciation in most of Wisconsin’s nine agricultural districts. Southeastern Wisconsin, in particular, has seen a nearly 18% decrease in farmland values compared to 2018 reported sales.
Things may not improve in 2020 given the high level of uncertainty surrounding commodity price projections. The lower interest rates and various financial help packages offered by the government provide some hope for land values to remain steady in 2020. As of June 1, 2020, the data for the first quarter of 2020 indicated stable land prices and did not show any negative impact from the COVID-19 crisis.
Influences on land values
In recent years rent has been relatively high compared to value, leading to a higher return to land ownership relative to land rental.
The 2019 NASS Wisconsin average rental rate for non-irrigated cropland was $137 per acre, which is about 3.2% of the statewide average sale price. Ten years ago, land rents were low relative to land prices, leading to intense competition for land rental and ultimately to a rapid increase in rental rates (8.4% increase per year between 2010 and 2014).
The pressure created by growing environmental concerns and the concentration of livestock in some areas has heightened the value of land for nutrient management purposes. In those areas, that use may be a dominant factor in driving demand, even more so than crop and feed productivity. Hence, livestock concentration has also become a key factor affecting local land values in Wisconsin.
Language for this article was drawn in part from the Wisconsin Agricultural Land Prices report, available online at https://farms.extension.wisc.edu/articles/wisconsin-agricultural-land-prices/. The report includes an interactive map, reporting farmland sales data by township.