The following is a release from Northwest Farm Credit Services:
Spokane, Wash. (August 16, 2011) – Low capitalization rates and increased farm incomes have contributed to the 2011 increase in farmland values according to a land value survey released by Northwest Farm Credit Services, the Northwest’s largest agricultural lending cooperative.
Roger Cramer, Senior Vice President-Risk Management and head of the Appraisal Services Department, said, “Throughout the Northwest, most transactions are between landlords and tenants with few properties being exposed to the open market. Strong commodity prices and favorable interest rates continue to fuel optimism in the agricultural market. The higher commodity prices have attracted institutional investors, real estate investment trusts, and individual investors to the market for agricultural properties in the more productive areas of the region.”
Cramer reported that sales activity in the Northwest had increased in the first six months of 2011, though not at the steep increased prices of the Midwest ag land sales activity.
Northwest FCS’ survey is based on real estate and sales activities that are monitored by Northwest FCS appraisers throughout Idaho, Montana, Oregon, and Washington. The following are appraisers’ observations during the first six months of 2011.
Idaho
Strong commodity prices and favorable interest rates have increased the purchasing power of area producers. Subsequently, local producers expanding their land holdings and out-of-area buyers remain the primary market participants. While most interest comes from established operators, activity from institutional buyers has increased in areas of Eastern Idaho.
Commodities such as grain, beets and potatoes have competed for available acreage. Good quality agricultural properties are generally sold word of mouth, seldom being placed on the open market. This, in combination with high agricultural land rents, has decreased the supply of good quality agricultural properties on the market. Strong commodity prices continue to fuel optimism in agricultural markets. Agricultural land values are stable to increasing.
Strong commodity prices and historically low interest rates continue to impact farmland prices in areas of Idaho. While the market for marginal land and irrigated acreage in outlying areas remains soft, demand for good quality agricultural properties in the more desirable areas has increased.
Montana
Areas of Montana that were previously influenced by development and recreation continue to show declines. The weak economy and unemployment continue to trouble the market for rural residential and part-time farm properties. Markets in more traditional agricultural areas are seeing the most activity.
Both irrigated and non-irrigated croplands are in demand and the typical buyer is an existing operator expanding their operation. Supply in the agricultural market remains low with properties selling readily if offered at market supported prices. Most transactions are between landlords and tenants with few properties being exposed to the open market. Strong commodity prices continue to fuel optimism in the agricultural market. The combination of heavy snowfall and above average rainfall has impacted agriculture in areas of Montana. Flooding related issues have hindered farming activities. Pending the outcome of the 2011 crop and the financial condition of local market participants, weather related issues may cause future market activity to be delayed.
Oil exploration has created an increase in demand for residential and rural residential properties in areas of Eastern Montana. Housing tracts in areas impacted by increasing oil exploration sell readily at record high prices. However, in general, the rural residential market in Montana continues to struggle. Inventory levels in this market remain relatively high.
Oregon
Supply in the agricultural market remains low with properties selling readily if offered at market supported prices. Most transactions are between landlords and tenants with few properties being exposed to the open market, creating a decrease in listings.
Much of Oregon has been impacted by a long and wet spring delaying plantings, potentially impacting commodity price. Pending the outcome of the 2011 crop and the financial condition of local market participants, weather-related issues may impact future market activity.
Demand for rural residential, part-time farm and recreational properties remains weak in all areas. While area realtors report increased inquiries, activity has generally remained low with little indication of near-term improvement in values noted. Stringent financing continues to impact the smaller part-time farm market. Rural residential properties have been moving at discounted price levels. True market listings have been competing with short sales and lender owned properties. Near term expectations are that values for recreational and rural residential properties will remain under pressure.
Washington
Most properties with strong agricultural production histories are being purchased by two types of buyers. First, the established farmer looking to expand their operation. Many of these buyers are purchasing land they have leased for many years that landlords are selling to benefit from historically high land prices. Second, are out-of-area investment companies diversifying their portfolios through investment in agricultural properties. These companies continue to look for good to excellent properties and will pay premiums. The premiums paid are not as lucrative as in the past and they are being more selective.
Dry land property values in Eastern Washington continue to be stable to increasing. Land is tightly held with very few tracts exposed to the open market. Farm income has been strong with above average yields, high commodity prices, good weather conditions, sizeable government payments, and price protection from crop insurance guarantees. Sales of lower yield properties represent a large portion of the recent market activity.
While sales have recently increased in the North Columbia Basin, sales activity generally remains slow in Central Washington due mainly to the limited number of good quality tracts on the market. Most properties, if priced competitively, have sold quickly and are not exposed to the open market. High commodity prices and profitability in the tree fruit industry are expected to positively impact open irrigated land values in the near term.
To read more, go to Northwest FCS Land Value Survey.
Northwest FCS is a customer-owned lending cooperative, providing credit, related services and crop insurance to farmers, ranchers, agribusinesses, commercial fishermen, timber products producers, equipment dealers, chemical suppliers, part-time farmers and rural homeowners in Montana, Idaho, Oregon, Washington, and Alaska. For more information, go to www.farm-credit.com.
Source: Northwest Farm Credit Services
Posted by Haylie Shipp
