MN Farmland Values Still Increasing

At the end of each year a survey is conducted for farmland sales in fourteen southwestern Minnesota counties. The survey reports bare farmland sales to non-related parties for the first six months each year. Data collected indicated prices increased from an average of $2262 in 2005 to $3702 in 2008 or an increase of 64%. A large portion of this increase (30 of 64%) happened in 2008. Farmland prices increased, in these fourteen counties, from an overall average of $2849 per acre in 2007 to an average of $3702 in 2008.

Only one county experienced a decline in 2008, with a negative 2.4% change while having the largest increase in 2007 of 47.8%. Land sold each year can vary by region even in a county, so values can fluctuate from year to year.

Supply and demand will determine how high these farmland prices go. The simple return on investment which is determined by rental rates will determine how competitive farmland is compared to other investments and this will determine a value for farmland.

If interest rates rise, or farm rental rates fall, the value of land is sure to be affected in a negative way. But as long as these factors do not occur, the price of farmland will continue to climb. There are indications that land values have started to decline 10 to15% in the second half of 2008 as the stock market and grain price fell considerably.