An overview of the Sioux County sale recently appeared on the dtnprogressivefarmer.com website (Crazy Sioux County Land Auction Strikes Again).  As Marcia Zarley Taylor points out, the ag economy in this part of NW Iowa is unique – grain farmers have been making money, but the livestock sector is thriving as well. Many brokers and appraisers called this sale an abnormality, yet whenever you have several financially strong buyers all looking to purchase land in a specific location, the final sale price can be significantly higher than recent sales elsewhere.

Across the Midwest, all the record high prices the past 12 months have had the same common theme – the farm is ideally situated in an area where at least 2 farmers are willing and able to pay a premium for its location.  In many cases, these potential buyers adjoin the subject parcel or have driven their equipment by it for years hoping for the chance to own it someday.  In some areas, land seldom comes for sale and buyers know that they must buy now if they hope to buy at all. And sometimes, unusual variables come into play – a farmer wants to expand his livestock operation but must have additional land to spread the waste.

In all the situations mentioned above, location is the most important variable. Move a farm 5 miles in any direction and the sale price may be 25% lower… simply because the neighbors are different.  Or stated differently, record prices can be explained by looking at who the neighbors are; and non-record prices can be explained by looking at who the neighbors aren’t.  Landowners looking to sell in the next few months should keep this in mind – not every sale will set a record so make sure to set your expectations accordingly.

Sale price aside, we were able to talk to several lenders and land buyers during the marketing of our auction and found several of their comments quite telling, including:

Lender 1 – “You would be surprised to learn how many farmers have over $500,000 in the bank, just waiting for a farm to come for sale in their area.”

Lender 2 – “Farmers came in this spring to set up their operating lines of credit this spring, just like normal.  The surprise is how many that have not borrowed any money thus far and it’s already the end of June!”

Broker 1 – “There are going to be a lot more tracts coming on the market in the near future.  Landowners are hearing about these high prices and are ready to take advantage of them.”

These comments confirm a couple of things that I have been thinking for some time – A. Farmers are going to continue to be quite aggressive land buyers.  They have cash in the bank and the crop prospects for 2011 look quite good at the present; and B. There will likely be more tracts for sale this fall.  Some of this new supply may be investors taking profits, but a lot may be heirs and beneficiaries deciding that the time to take the money and run is now here.  As an offshoot of this thought – I also anticipate more “no-sales” this fall, not because the price isn’t in line with the market, but more because expectations are too high.  As we saw in Vermilion County, not all farms are worth $12,000 per acre.

After completing our initial research in December, we thought that the property would sell for somewhere in the mid-$5,000 per acre range based upon comparable sales – the property had good eye appeal but the soils just weren’t that productive at least relative to Central Illinois.  Our advertising and promotional efforts began in mid-January and slowly my optimism increased.  We had nearly 150 people call or visit our web site in order to receive a brochure, and this was in addition to the nearly 3,000 neighbors and absentee investors we direct mailed a brochure to.  As I told my client the day before the sale, if we’re really lucky we may reach the mid -$6,000 per acre range. 

At the auction, we had over 75 registered bidders.  Some were interested in only individual tracts and others were interested in all 512 acres.  After two hours of aggressive bidding, the property ultimately sold to 2 buyers.  One party bought the house and improvements on 5 acres, along with another 8 acres of pasture, for a total of $171,000.00.  The second party bought the remaining 499 acres for $3,572,744… $7,160 per total acre or $7,490 per tillable acre.  As you might appreciate – this was one instance when I didn’t mind being wrong on price!  I had several people comment afterwards that the sale would now be considered the “high-water” mark for Bond County.

I think that the final price was a result of several factors – A. high commodity prices; B. low interest rates; C. little available land to buy; and D. enough acres to draw farmers and investors from a larger radius.  It also proved that in this market, the public auction is the most effective way of getting the dollars out of the pockets and on to the table.  Right now, land is selling for record prices because of the “perfect storm” of factors mentioned above. Not sure how much longer the storm will last but the land owners selling today are sure reaping the benefits.

Tract 1 + 2 (83.55 Acres) – $265,000 or $3,171.75 per acre.

To download more details from the auction, click here.

Tract 1 (93.08 Acres) – $390,000 or $4,189.94 per acre; B/C Soils; FSA considered this tract to be mostly tillable land, although 22 acres had been enrolled in CRP previously and were not in production at the present time;

Tract 2 (124.69 Acres) – $590,000 or $4,731.73 per acre; A/B/C Soils; 69% Tillable, with the balance in pasture/woodlands, and divided by a creek.

The overall price for the entire 217.77 acres was $980,000, or $4,500.16 per acre.

Click here to download more details from the auction.