Despite ag slump, farmland values climb again


(2/20/2019)

by CHRIS ROGERS

It might sound crazy, but farmland values are going up again. For the last few years now, commodity prices for corn, soybeans, and milk have been stuck in a slump and many farmers are facing financial challenges, but tillable land keeps on selling for top dollar. That means cropland valuations — on which property tax bills are based — are going up again in 2020, despite many Minnesota farms posting declining incomes.

“With what farmers are making today, it makes no sense,” Winona County Assessor Steve Hacken said. Across the Midwest, farm bankruptcies have been on the rise, some dairy farmers have been forced to sell their herds, and 70 percent of Minnesota farmers reported falling incomes in the final quarter of 2018, according to a recent Federal Reserve Bank of Minneapolis survey. “Every farm is unique. There’s a lot of stress out there,” Winona County Farm Bureau President Glen Groth stated. “I think a lot of farmers are getting increasingly nervous. A lot of farmers with a good cushion have seen that cushion disappear. But at the same time, we’re optimistic.”

Despite the tough times for some farms, Hacken explained, “The rules are, you have to value stuff at what it sells for,” and in 2018, there were several farmland sales that topped $8,000 per acre. In Fremont Township, one farmer bought a neighboring farm for $8,566 an acre.

How farmland prices can go up while the farm economy is struggling might be enough to make one’s head spin. “But one of my clients said the other day, ‘The rule of supply and demand sometimes trumps the rule of they aren’t making any money,’” Hacken said. Many of the farmers purchasing land at high prices are neighbors, and there are only so many opportunities in a lifetime to buy a neighboring farm. Hacken reported that one buyer told his staff, “I’ve been looking to buy that property for 40 years, and it finally became available.”

Other sales are less easily explained. One piece sold for over $8,000 an acre to a farmer who lives near Northfield, Hacken reported. “Heck if I know,” Hacken said.

The bottom line is that Hacken said his office has no option but to raise the valuations on farmland. For prime tillable land, valuations will go up from $7,600 per acre for taxes payable this year to $8,200 for taxes payable in 2020. Hacken stressed that only the best tillable land will be valued that highly. Most farms in the county have lower crop ratings and will be valuable somewhere between $5,050 and $8,200, depending on the quality of the land. Property owners should expect to get statements listing their properties’ new valuations in late March.

Non-tillable land is going up, too. Partly because of an influx of metro-area buyers paying top dollar for hilly, Winona County hunting land, the valuations on non-tillable land is going up from $2,500 to $3,250 an acre for prime parcels, Hacken reported. Asked whether housing development speculation was affecting non-tillable prices, Hacken responded, “No, I don’t think so. I think these guys like to hunt … These properties people are buying, some of them are pretty rugged, and usually rugged properties, you’re not going to develop too much.” Hacken added of the sales, “When I’ve got seven of them, and all of them are over three thousand [dollars per acre], it’s out of my hands.”

Winona County saw an even greater uptick in farmland values several years ago. Across the Midwest, soaring prices for corn and soybeans in the early 2010s drove up the price of cropland. Locally, a few sales topped $10,000 per acre, tillable land property values rose 44 percent in one year in 2013, and Winona County property tax valuations rose to a peak of $8,000 for prime cropland. Valuations declined slightly to $7,600, but cropland values — and property taxes — remained relatively high even as commodity prices plummeted.

Will next year’s increase in farmland values lead to higher tax bills for local farmers? It is hard to say, Hacken responded. The value of other forms of real estate — including residential properties — is also rising quickly. That is especially true in St. Charles, where — like other Rochester, Minn., bedroom communities, the city’s housing market is hot, Hacken stated. Then, of course, tax bills are dependent on what budgets local governments set. “We don’t really know,” Hacken said of how rising values will affect tax bills in 2020.
Chris@winonapost.com


 

CAPTCHA image
Enter the code shown above in the box below
(Items marked * are required)

Search Archives




Our online forms will help you through the process. Just fill in the fields with your information.

Any troubles, give us a call.