Farmland values rising
WILLMAR -- Farmland values in west central Minnesota are continuing to climb to new, historic highs, assessors in the seven-county area around Willmar report.
The rising values come despite some angst over whether the values might represent a bubble in the making.
"Is this the new normal, or is it going to come down?'' asked Steven Taff, associate professor and extension economist in the Department of Applied Economics with the University of Minnesota.
Taff said the rising values seen in west central Minnesota are very similar to what's being seen throughout Minnesota's farm country. A bumper crop and strong commodity prices are generally cited as the cause for the rising values, although area assessors note the trend has been pronounced for at least three years now.
"It's been quite a strong market,'' said Swift County Assessor Edward Pederson, echoing a view held by many of his colleagues.
Farmland values vary considerably in Swift County, but both fair and good farmlands are seeing rising values. Pederson said sales in 2010 ranged from values in the low $2,000s per acre to the upper $4,000s, with some sales cracking the $5,000-per-acre mark.
Chippewa County recorded its first farmland sale at over $6,000 per acre on Thursday, according to Assessor Carol Schutz. She had seen a number of sales with values in the upper $5,000 range per acre during the past year.
Like most area counties, Chippewa County saw a notable increase in both values and number of land sales that occurred in the last couple of months of 2010.
Assessors in the counties use land sale data through the end of September to compute the assessed values for taxing purposes in 2011. All are reporting an increase, but said the increase would be significantly greater were the sales from the last two months included.
"Every time I think it has reached the top, then it's higher,'' said Tim Falkum, Kandiyohi County assessor. Kandiyohi County saw recent land sales at $5,900 an acre in the southernmost portion of the county. Values of $4,500 to $4,800 are more common.
Renville County is the county's leading agricultural producer, and land values show it. Assessor Barb Torchlil said 2009 saw 59 farmland sales with an average acre value of $4,980, with some lands going for $5,900 to $6,100.
In 2010, the county saw 41 sales with an average value of $5,600 per acre -- with a $6,500-per-acre sale recorded.
Yet in contrast to neighboring counties, Renville County has seen a cool down in more recent months. Since Oct. 13 the average value has fallen to $5,400, with $6,000 and $6,100 values the highest seen, said Torchlil.
To the west in Yellow Medicine County, Assessor Connie Erickson said the last few months of the year may have seen a record number of land sales.
Values continued to inch upward, with $5,400 to $5,700 values reported on sales for some of the county's best lands, Erickson said.
Meeker County Assessor Robert Anderson has also seen a similar flurry of sales since October, with the same upward trend. He's seen lands selling for nearly $6,000 per acre in the portion of the county closest to Renville and Kandiyohi counties.
There is one exception to this all: "I'm kind of the oddball,'' laughed Lori Schwendemann, Lac qui Parle County assessor. Values in Lac qui Parle held steady through 2010.
A price somewhere over $3,000 per acre is common, although values range from just over $2,000 to over $4,000 an acre in the county.
The rising values will have the effect of continuing the trend toward placing more of the property tax burden on farmlands. Values for residential and commercial properties in the counties have remained relatively stable, the assessors noted.
They also pointed out that the vast majority of sales are to local farmers, and not to outside investors. Most of the sales are taking place at auctions with active bidders, rather than through private negotiations, the assessors said.
By the same token, they caution not to overestimate the value of lands by any single sale. One sale in Swift County saw bidders drive up the price to $4,000 per acre on one farm. Across the road -- hardly more than 60 feet away -- a separately owned field sold for $2,400 per acre.
Taff also cautions that the data cannot show the cases where landowners withdraw parcels from the market when they don't see the prices they want.
While there is no doubt the overall sales will raise the median values for farmlands throughout the region, Taff also cautions against giving too much attention to the high values seen at some sales. "It's human nature to talk about the relatively few, high-end sales,'' he said.
He also pointed out that overall, farmland sales in any given year represent less than 1 percent of all land.
As for whether values will continue to climb in the months ahead, the assessors are as uncertain as everyone else. "It's kind of a different time,'' said Swift County's Pederson.