Ag land values skyrocket

Published 10:11 am Friday, April 5, 2013

A farmer harvests his Mower County land last fall. Many farmers across the county will see the value of their taxable land increase. Herald file photo

A farmer harvests his Mower County land last fall. Many farmers across the county will see the value of their taxable land increase. Herald file photo

It’s no secret: The value of tillable land continues to rise.

Mower County farmers will rediscover that when they soon receive their 2013 valuation notices in the mail for taxes payable in 2014. The average tillable land value in Mower County will rise by 45 percent, according to Mower County Assessor Joy Kanne. The notices will be mailed within days. The county is required to raise the values to stay within 90 to 105 percent of all tillable land sales within the county. If sale prices are decreasing, the values will be changed to reflect that. Freeborn County 2014 valuations were recently sent in the mail, and their tillable land values rose by 40 percent, as well.

Several farmers were hesitant to discuss the issue without seeing their specific statements.

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Regardless, they indicated the jump is significant. According to Mower County records the average acre of tillable land will be valued at $7,600 per acre in Mower County.

“Forty-five percent is going to be a pretty significant jump,” said one farmer from east of Austin.

Brian Hanson from Grand Meadow agrees. In the back of his mind, as with some other farmers, there is the slight thought of potential collapse. One farmer recalled prices reached 2,500 per acre back then and quickly fell to $600 per acre. Mower County records reflect that, as well, as tillable land sold for $2,112 an acre in 1981 but fell to just $593 per acre in 1986.

“If it does crash, that wouldn’t be pretty,” Hanson said, yet didn’t seem too worried. “That’s the trouble; you can’t predict it.”

Real estate broker Greg Thomas with Upper Midwest Management in New Ulm doesn’t think a collapse will happen. UMM oversees roughly 80,000 acres of landowners’ farmland across a five-state area. Thomas said strong commodity prices are a driving factor for high land prices. Furthermore, many of today’s land purchases are by farmers with plenty of acreage who can afford to do what Thomas calls “cost averaging of acres.”

For example, farmers who bought land at $2,000 per acre and have most of their property paid for can afford to add acres at a very high price, as their average purchase price per acre will still be relatively low. Regardless, anybody who wants farmland will have to pay dearly for it.

“It’s hard to make cash flow at that level, but it’s what the market is,” Thomas said about land nearing $10,000 per acre. “If you want additional acres, you’re going to have to pay.”

Yet in other areas, particularly farther south, Thomas has seen valuations stay steady or even slightly drop with poor crops. Thomas said other factors, such as the future of the ethanol industry and world demand for grain will also cause land prices to fluctuate as they affect commodity prices.

But in Mower County, cropland remains in high demand.

Since October 2012, with 24 cropland sales already, the average price of tillable land was $8,455 in Mower County. That has risen from $7,076 in the previous year, and from $5,392 and $4,620 the two years prior.