Why Isn't There More Farmland For Sale?

Why Isn't There More Farmland For Sale?
Photo Credit:AgView | Story Source: Farmers National Company

By: Randy Dickhut, AFM
Senior Vice President - Real Estate Operations - Farmers National Company

 

It is always helpful to look at statistics when analyzing the land market, whether it is sales price, volume of sales, or trends. One particularly good source of statistics on land ownership trends comes from the “Iowa Farmland Ownership and Tenure Survey 1982-2017” authored by W. Zang, A. Plastina, and W. Sawadgo with the Iowa State University Extension and Outreach, which I quote below. I use Iowa statistics as examples as these are similar to the trends in other states as observed by Farmers National Company and its agents.



One reason there currently is not more farmland on the market for sale is that the land is in secure hands overall. The amount of farmland in Iowa that is debt free is 82%, which is up from 62% in 1982. Financially secure ownership for most farmland is coupled with the age of the owner. The Iowa study finds that 60% of farmland is owned by someone over the age of 65 and 35% is owned by those over 75 years old. Also, 20% of Iowa farmland has been owned for over 40 years. Current tax laws for capital gains and stepped-up basis encourage holding a real asset, such as farmland, for the long-term instead of selling during the owner’s lifetime and incurring a large tax bill.



The second big reason there is not as much farmland for sale at this time as might be expected with the less profitable farm economy is the owner’s purpose for having land as an asset. In the Iowa survey, 49% indicated current income was the main reason for owning farmland, 19% said as a long-term investment, and 29% said for family or sentimental reasons. Therefore, the vast majority at 97% have a strong economic and longer-term purpose for owning farmland. And, only 7% of farmland owners in Iowa expect to transfer their farms by selling to the public and not transferring the property to their family by some method.



These are useful statistics to explain why less than 1% of farmland is currently being sold in the open market. But, there could be further outside influences such as lower commodity prices, rising interest rates, and trade issues that could cause some changes in the land market ahead.



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