Sales Season Underway
September 27, 2017
Fall is always an exciting time for those of us connected to agriculture. Harvest is the culmination of a 6 to 8-month dance known as a “growing season” in which many people live or die by the weather forecast and other variables. Personally, harvest has always been one of my favorite times of the year. As a kid, it meant combine rides with my grandpa while listening to Illinois football on the radio. As an adult, I am in tune with the reality and importance of what this time of year means to so many.
Fall is also a very interesting time of the year for those of us who also have a foot in the real estate world. We are entering what I have affectionately dubbed “sales season”. Historically speaking, post-harvest real estate transactions are the norm. It is a time when owners and operators make moves to better position themselves for the next cropping season. All of this said, I am expecting a highly active land market in the months ahead.
As I type this note, it isn’t even October and we have six new land listings and three auctions for the fall. As I talk with friends and colleagues in the industry, I hear similar reports. Many valid reasons to sell land are emerging at the same time.
- Settling of an estate. The passing of land from one generation to the next is unavoidable. Complexity accompanies this as families come in all shapes, sizes and varying degrees of familial camaraderie. At times, selling their land asset is the best viable option for all involved.
- The boom market of 2012-2015 is becoming a memory. Without question land values here in Illinois are still strong from a long historical view point. However, the figures we were seeing a few years ago are gone. Mild to moderate land value decreases have occurred over the last several years and many suspect that trend will continue. This has led some landowners to feel that now might not be a bad time to still capture huge profits. I don’t foresee a collapse in the land market, but I also don’t see a catalyst in the short term that can return us to the values of 2012-2015. This trend lead to some sales.
- The aging farmer. Farmer demographics is a fascinating topic for a different article. In short, the 2012 USDA census showed that the average age of the American farmer is 58.3 years old. This average age has gone up in every USDA census in my lifetime. As farmers retire, we have seen some sell off a piece of land or two if they don’t have the next generation waiting in the wings.
- Tight farm economics. Similarly, farm economics is a topic worthy of a book, not a web article (probably worthy of a more highly educated author as well!). Studying the surveys from the University of Illinois and other academics, along with honest chatter from farmers themselves, will show that we have stacked several tight years on top of each other from an operator perspective. No one likes to talk about it, but brokers from across the state have seen more and more sales being triggered by economic woes from the owner/operator.
- The opportunistic farmer. Farmers today are rarely content with what they own. We see many successful farmers today constantly keeping an ear to the ground on the land market. Maybe they would sell that “40 over there” if an “80 over here” could be bought. Upgrading the land they own and scouting out prospects for investor landlords is commonplace.
There could be more bullet points with added depth, but these five scenarios alone have led to sales and listings already this fall. I expect more of the same moving forward. As harvest wraps up, farmers and landlords alike will take a hard look at their bottom line and determine what line they fall in. The line of opportunistic buyers is like the line for Space Mountain at Disney World – it seems to always be there. This time around though, I expect the line of potential sellers to be longer for reasons mentioned above. The “selling season” will be interesting. They all are…
Author: Luke Worrell