Pressure's on to sell farmland before end of the year
The article is correct, I have never seen so many farms on the market to sell as I have seen recently. It is even alot more than in the 1980's during the height of the farm crisis and so many bankrupt farms were thrown on the market. You would think that this very large amount of farms changing hands would actually lower the per acre price or dollars per CSR Point. But that is not happening, prices are continuing to march higher, in some cases much, much, higher. Article is below:
Pressure's on to sell farmland before end of the year
DENVER, IA. — The clean, placid appearance of post-harvest Iowa farmland appears to be far removed from the messy fog of Congressional politics and the fiscal cliff.
But pressure is intense to sell land before Jan. 1 when, if Congress doesn’t intervene, capital gains taxes will rise from 15 percent to 23.8 percent and deductions on estate taxes will drop from $5 million to $1 million.
“If there is a chance that you may want to sell your farm, then you should think hard about getting it done before the end of 2012,” said Des Moines lawyer Bill Hannigan of the Davis Brown firm.
On the front lines of Iowa’s farmland boom, farmers and landowners are filing into small-town meeting halls for auctions with one eye on the tax debate in Washington.
“The tax changes are on everybody’s minds. We have a sale every day, except Sundays, between now and Thankgiving,” regional sales manager Sam Kain of Farmers National Co. said before selling 169 acres of Bremer County farmland from the estate of Alvin and Maxine Walther on the day before the election.
“I’ve been in this business for 30 years and I’ve never seen it this busy,” Kain said.
The extra inventory of land sales hasn’t cooled off Iowa’s hyperheated farmland boom. In October the state set a record price of $21,900 per acre in Sioux County.
When the auction began at Denver, auctioneer Jeff “The Dirt Doctor” Obrecht reminded the gathering: “Land like this comes along just once every 50 years.”
Obrecht didn’t really need to entice bidders further. The Walther land bore a Corn Suitability Rating of 87, which attracts farmers to an auction like the opening of a Tom Hanks movie at the multiplex.
So it wasn’t much of a surprise that the winning bid of $15,700 per acre from neighboring farmer Ken Eggena came after just 30 minutes of auction, with a break included.
Duane Walther, one of six children who watched the sale of the family land, reflected wistfully after the sales concluded.
“Dad bought the first parcel of land for $100 per acre in 1946,” Walther said. “Mom died earlier this year and we are settling the estate. I just think of dad up there and he must be amazed at the price of the land.”
A week earlier a similar farmland sale played out at Gilbertville, south of Waterloo, where a 102-acre farm sold for $15,600 per acre.
The sale was triggered by the death of Maxine Even, who had survived her husband, Cletus. The land was in the Evens’ estate and none of the 13 surviving children could afford today’s land prices.
“Some of the siblings are happy and some, who wanted to keep the land in the family, aren’t,” said a son, Gene Even, who lives on an acreage near the farm.
Cletus and Maxine Even had paid $31,740 for the 102 acres on March 1, 1965. Almost a half-century later neighboring farmer Ben Riensche made a successful $1.6 million bid at auction for the same ground.
The drought last summer apparently added more fuel to Iowa’s farmland boom, especially when Iowa’s fall harvest yields were better than feared.
During a break at the Gilbertville sale, auctioneer Troy Louwagie of the Hertz Farm Management Co. said: “When the drought hit last summer, who would have believed that land prices would stay this high?”
“But most farmers ended up with yields better than expected, which just reinforced the idea of how valuable Iowa farmland can be.”
So strong is the demand for Iowa farmland that even the less desirable, sandy land is going for top prices.
A 136-acre parcel near Madrid owned by the James and Beulah Duling estate sold for $6,200 per acre. That’s hardly the stuff of headlines in an era of $15,000-and-up prices, but it’s well above the state average of $5,064 per acre as recently as 2010.
Son Carl Duling, a retired teacher in Madrid, was satisfied with the sale.
“Dad paid $124 an acre in 1961,” Duling said. “The land is sandy. Not top quality, but it brought a good price. We’ll use the money to pay for mom’s nursing home expenses.”
The high prices paid for Iowa farmland inevitably conjure up memories of the extended Great Depression in agriculture during the 1920s and ’30s and the farm crisis of the 1980s.
As rural prophets warn constantly, both of those calamities were preceded by the same kind of commodity and land price boom that Iowa has enjoyed since the middle of the last decade. But others point out that this time is different, in part because corn prices are above $7 per bushel and expected to stay there, if the U.S. Department of Agriculture forecast is to be believed.
“The price of corn is high and interest rates low and there is a shortage of alternative investment,” Kain said.
Lenders who were overextended three decades ago have battened down the hatches this time. Farm Credit Services of America has imposed a cap of $5,200 per acre on farmland loans, which would have leveraged loans on the Walther and Even sales at 33 percent.
“Back in the 1980s, you saw lending going 80 percent or more of the value of the loan,” said Brian Thielges of Iowa Farm Finance Corp. of Des Moines, who originates and packages farm loans for Federal Agricultural Mortgage Corp., or Farmer Mac.
“Today, you seldom see loans going more than 60 percent or more of the value, and many are less,” Thielges said.
It is also true that Farm Credit, the one farmland lender that I highly dislike since they left me hanging on a $700,000 loan in 1999 to purchase a 1/2 section and I had to get the loan from a Private Bank 2 days before the Closing of the Purchase agreement to have the money to purchase it caused me to about have a heart attack. 2 days to get a farmland loan isn't much time at all, I wanted to shoot the Farm Credit guy who said I was approved for the $700,000 loan and then backed out 2 days before the closing of the purchase agreement. Anyway, there leading cap of $5,200/acre is correct, that is only 33% on top-quality Iowa farmland of a value of $15,000+/acre. I think that $5,200/acre leading cap is awful hardcore, but after the farm crisis guess they have learned. On a high-quality 320 acres, that requires a $3.2 Million dollar downpayment and a loan of $1.6 Million. Iowa farmland is fast becoming a game for only the "BIG BOYS".
ICF - farm credit sold me back a farm in the 80's after land collapsed. They could have screwed me to the wall. I have used them for equipment from time to time and they seem to now have their act together. John
You know what, and I think you will agree ICF, in 1-2 years these people hurrying to sell now are going to look back and wish they would have been more patient and not panicked.
The increase in land values will offset all the new taxes coming forward.
“If there is a chance that you may want to sell your farm, then you should think hard about getting it done before the end of 2012,” said Des Moines lawyer Bill Hannigan of the Davis Brown firm
Of course Hannigan is going to sell this, more sales, more profits for him.
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