Farmland, commodity prices still disconnected



Economic ups and downs can affect farmers as much as the weather, and in Winona County, high prices for tillable land have been slow to respond to falling prices for milk and corn. When it comes to rental rates for cropland, the story is more complicated.

Crop prices surged in the early 2010s, jumping from $3.47 per bushel of corn in 2009 in Minnesota to $6.67 per bushel in 2012, according to the U.S. Department of Agriculture (USDA). Across the Upper Midwest, land prices surged, too. In Winona County, cropland valuations jumped by 40 percent in one year in 2013.

Then, crop prices fell. Minnesota farmers earned an average of $3.58 per bushel in 2014, $3.37 in 2015, and $3.30 last year. Milk prices followed a different but similar trajectory, rising to $24.80 per hundredweight in 2014 and falling to $16.80 last year in Minnesota. 


Land prices, on the other hand, remained high. Cropland values, as judged by the Winona County Assessor’s Office, peaked at $8,000 per acre for the best tillable land in Winona County’s flattest townships following 2014. They have declined only slightly since then. Today, the best land in the county is valued at $7,600 per acre, according to Winona County Assessor Steve Hacken.

Rental rates rising or falling?

Many farmers, especially young farmers like Winona County Farm Bureau President Glen Groth, rent land. Obviously owning is ideal, Groth explained, because of the long-term security and the ability to borrow against the value of the land. “It’s just the price of admission to that club is so high,” he said.

So how are farmer-renters doing in the current market? According to one source — USDA survey data — the rent local farmers paid for cropland in Winona, Buffalo, and Trempealeau counties increased even as commodity prices and land prices fell. Across the 10 counties of Southeast Minnesota, average rental rates peaked at $237 per acre in 2014 and fell to $211 in 2016. Winona County rates trailed the regional average until last year, when local rates kept on climbing to $228, even while region-wide rental rates fell, according to the USDA. Rental prices rose in Wabasha and Houston counties, too, but only slightly — from $222 to $228 in Wabasha County — while rental rates in Fillmore and Olmstead counties dropped— from $236 to $214 in Fillmore County. Buffalo and Trempealeau counties experienced a similar phenomenon. Rental prices there rose faster than the west central Wisconsin region as a whole, according to USDA surveys.

Merchants Bank St. Charles Branch President Jim Allen said he has seen a very different trend when working with Winona County farmers: falling rental rates. Allen said he has seen local rental prices drop considerably, as much as 40-50 percent since 2013. In his experience, rental rates have declined more sharply than land values, with land prices only decreasing perhaps 15-30 percent.

USDA surveys depend on farmer participation, and while Winona County Farm Bureau President Glen Groth noted that some farmers do not like to share the ins and outs of their businesses, the USDA numbers seemed plausible to him.

On the other hand, Groth said that in his personal experience, landowners eased their rental prices when commodity values dropped. In 2012 and 2013, Groth said that if he was not willing to pay a high price for rented land, somebody else would. Now, “Most landowners know I’m not making much for money these days so they’re not really putting the screws to me,” he stated.

Whatever is going on in the market, Groth added, “You’ve just got to treat people fairly and pay an honest price for what the land is worth and try to keep people happy and treat their land the way they want it to be treated.”

Cheap commodities, expensive land

Whether they rent or own, most farmers are not making much money at these prices, Allen and Groth said. “The closer a person’s rent is to $200 the better chance they have, because it’s just really hard to pay over $200,” Allen said. “Cash corn at the river is three and a quarter. Break even is probably closer to $3.75. These operators just can’t pay too much for this land and expect to come out ahead,” he stated.

Why have land values remained relatively stable, while commodity prices went down and stayed down? Land buyers may have been expecting commodity prices to shoot up again, for starters. Hacken and Groth also theorized that Winona County’s dairy industry may have something to do with it. Winona County is the number two dairy-producing county in Minnesota, and that means that it has a more diverse agricultural economy than crop-heavy counties to the west, where the surge in land values was strongest. 


Winona County was somewhat insulated from the upward swing in land values, and now from the downward swing, as well, Hacken said. Even when commodities are down, dairy farmers may be willing to pay more for convenient land, Groth added. Manure and forage are heavier than grain and more expensive to haul long distances, so dairy farmers are often willing to pay a little bit more for nearby land to grow forage and spread manure, he explained.

Both Hacken and Allen predicted that 2018 may be the year that the local cropland market finally reacts to low commodity prices and land values come down significantly. “This could be a very different year,” Hacken stated. “This is going to be three years in a row that farmers haven’t made much money.” Allen said of decreases in cropland values, “That’s a real likelihood, I would say … but you never know.”


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