By MICHELE F. MIHALJEVICH
Indiana Correspondent

WABASH, Ind. — Some farmland owners might be looking to take advantage of continued high land prices by selling their property, area real estate experts said last week.

“It’s not a preponderance of landowners, but some are asking the question, ‘Should I sell or not?’” said Howard Halderman, president of Halderman Real Estate Services in Wabash.

“I think there are better than 50/50 odds the land will be worth more at the end of the year than it is now. So if they sell now, they’re selling at an all-time high. If they wait, the prices will continue to go up.”

The landowners who might be interested in selling are generally absentee owners who don’t have personal ties to the property, Halderman noted.
“If they bought the land as recently as five years ago, they’ve seen an appreciation of 30 to 40 percent since they bought it. They might be the ones who may or may not believe the value will go up, so they figure they’ll just clip that coupon now.”

Farmland values increased 1.4 percent nationally from 2009 to 2010, according to the latest report from the USDA’s National Agricultural Statistics Service.
In the Farm World coverage area, increases in land values ranged from about half a percent to 4.5 percent.

While absentee owners might be thinking about selling, farmers are an entirely different matter, Halderman explained.

“Many see (land) as the best performing asset they have. It’s really a pretty good asset to own. Most are saying, ‘I like the farm. I like what it does for me. I think I’ll keep it,’” he said.

The total number of acres of cropland projected to be put up for sale this year is about 1.5 percent of total farmland, far below the historical average of 3-4 percent a year, Halderman stated. Farmland that is put up for sale is being purchased mainly by other farmers or by investors who bring mostly cash to the table, he added.

The market for land to turn into residential or commercial properties is stagnant, Halderman said, except in cases where a specific end use, such as a hospital, is planned.

Schrader Real Estate & Auction Co. in Columbia City, Ind., has fielded many calls recently from investors looking for information on good farmland, according to R.D. Schrader, the company’s president.

“With current prices on quality farmland up more than 20 percent over 2009 in some areas and investors eager to diversify into agricultural land, we’re starting to see a greater interest also by farmers, in selling land and leasing it back,” he explained.

“Many investors and hedge funds are seeking precisely this type of investment, and this enables the farmers to secure their gains and still continue their farming operations.”

During recent auctions, the competition between local farmers and investors for a piece of property has sometimes become intense, which ends up being good for the seller, Schrader said. He said the situation led to strong prices on land they offered for sale during the fall and in January. Last year, the company sold more than $150 million worth of land.

In some cases, siblings who may have inherited land in the last 10-20 years are now considering selling, he stated.

“Landowners, by nature, are patient and oriented to the long term, but a lot of them for the first time are seriously considering options for selling their land,” he said.

Buying farmland is a good alternative to other investments such as certificates of deposit, stocks and bonds, said Bill Kurtz, chair of Kurtz Auction & Realty Co., which has offices in Owensboro, Ky., and Evansville, Ind. The company usually sells about 500 pieces of real estate annually at auction.
Investors and farmers are interested in buying because of low interest rates and high commodity prices, Kurtz noted.

“Farmers are either looking to buy more ground or to rent. When you think of a farmer with only 400 to 500 acres and you look at the cost of the equipment he’s farming with, it’s out of whack with the amount of land he’s farming,” he explained.

Kurtz said his company recently sent out mailers to absentee owners explaining that while land prices continue to be high, there’s no guarantee they’ll remain so.