GreenStone FCS | October 15, 2018
Joe Hickey | GreenStone Farm Credit Services
|This year’s report found prices for good farmland remained relatively stable throughout the territory, with a few outliers in high value areas. | Sheridan Realty & Auction Co.
Tracking the sale data generated from land purchases across Michigan and northeast Wisconsin allows our property appraisers to accurately value land for lending and other business purposes. This is critical to both the lender and the customer. To capture true land values we tabulate benchmark data in nine regions, segmented by land use within the territory. This specific data illustrates trends in the marketplace indicating areas where values may be fluctuating more than expected.
The data collected in the GreenStone territory is pooled with other Farm Credit associations to build a national database. We closely monitor land sales, both public and private, to gauge trends in the land values. Tracking this data annually keeps us aware of where values are headed and prevents any big surprises year after year.
The year-over-year change in values ranged from a 7.5 percent decrease in the northern thumb of Michigan to 6.3 percent increase in southwest Michigan. Land used for recreational purposes in northern Michigan saw a 12.5 percent increase in value.
The benchmark study includes several traditional row crop parcels across the Lower Peninsula of Michigan and northeast Wisconsin. Values are determined for 80- acre parcels.
We see the continuing trend in our territory is that good quality farmland prices remain remarkably steady. While demand for land is still dependent largely on location, if it is next to a farm with a capacity to expand, it will sell with little negotiation for price.
The western region of northeast Wisconsin saw the third consecutive year of stable benchmark value, following consis- tent growth the previous nine years. Since 2006, an 80-acre cropland parcel has increased from $197,000 to today’s value of $375,000. In the southeast part of the northeast Wisconsin territory, the cropland benchmark (80 acres) value decreased for the third year after 12 and 18 percent increases in 2014 and 2015, to today’s ap- praised value of $520,000.
In Michigan, there was a 6.3 percent increase in the southwest, following a 7.7 percent decrease in 2017, bring the value to $408,000. The mid-Michigan area remained stable with no change at $424,000. Cash crop land in southern Michigan went unchanged for the third year holding at $280,000.
Michigan’s northern thumb area continues to hold the highest value of the regions at $576,000 ($7,200 per acre), marking a 7.5 percent decline this past year. The Saginaw Valley cash crop land in Michigan, on a per acre basis, had a slight 0.7 percent drop to $6,375, coming down from the highest value recorded in 2014 at $7,406.
The lower corn and soybean prices have stabilized the base rental rates in the Thumb region to the $200 to $225 range for properties with higher productive soils. We expected rates to decline, however with the continued competition for land, land owners have no motivation other than relationship loyalty to lower rates.
The appraisal of the Michigan dairy with 1,600 freestalls on a 40-acre site showed a 5.5 percent decline to $4,500,000, down from the 10-year high of $5,200,000 in 2015. The 60 tie-stall and 40-acre site in Wisconsin showed no change for the second year, holding at $318,000.
The 80-acre recreational benchmark land surveyed in northern Michigan saw a second year of increased value, coming in at $144,000 ($1,800 per acre) up from $128,000 in 2017. Recreational tracts for hunting, fishing and non-consumer uses are in demand in Wisconsin and northern Michigan.
The residential and recreational sales activity for loans has improved slightly in 2018. Demand for rural residential houses in the Thumb region attract hobby farm buyers and rural “estate” buyers. We are finding with income increasing, more high- income wage earners from neighboring cities are investing in real estate.
GreenStone monitors three areas in the transitional land category southeast Michigan (Ann Arbor area); Lapeer County, Michigan; and Brown County, Wisconsin. Transitional land is defined as a property between uses with the current use likely to change.
The 40-acre tracts in Michigan showed modest gains with the land in the south- ern part of the state increasing 1.3 percent over 2017, to a value of $320,000 for the 40 acres; this increase follows double-digit growth in 2015 and 2016. Transitional land in Michigan’s thumb (Lapeer County) showed a slight decline of 2.0 percent to $160,000.
As commodity prices remain poor, we are seeing some farmers look toward non-traditional avenues for profits, including specialized enterprises and energy-related opportunities. In the thumb region, organic and non-GMO production continues to develop with local growers developing a network to market their production. Demand for this pro- duction stems from egg producers, freezer beef feeding operations, specialty food retailers and large food grade milling companies.
Hickey is vice president and chief appraiser at GreenStone Farm Credit Services.