This time of year, the pages of farm newspapers are filled with notices of farm sales. However, this year there are a lot fewer of those notices You might think in tough economic times farm sales would be on the rise. Joe Kessie, with Lake City Bank in Warsaw, says it is not the farm economy that is the factor, but the low interest rates that is keeping farmland off the market, “It used to be when a farmer retired he could sell his land and come to the bank and get a 5% CD. Well, you can’t get that anymore.”
Kessie says retiring farmers are turning to cash rent as a way of generating income, “They can still get a 2% to 3% return on renting their land to someone else. If they don’t need the cash right away, they will hold onto the land and let their estate deal with it.” As a result, not as many farms are coming onto the market.
Speaking of cash rent rates, Kessie sees rates coming down, but slowly, “Some operations have been able to make some adjustments.” He said the rental rates may not be coming down as fast as commodity prices have, but also said rate hikes also tend to be slower than sharp gains in prices. “We are in an adjustment period,” he stated.
Kessie worries that, with a continued decline in farm income, more forced sales of farmland could start to occur in the next few years, “We have not seen that yet and, as a result, it is a very quiet land market.”
While farmland sales are reported slow throughout the Midwest, on Thursday one of the largest parcels of farmland in Nebraska went on the auction block. At last report, the 28,000 acres had a top bid of $33 million.
Kessie, Senior Vice President and Regional Manager of Commercial Banking, was recently elected incoming chairman of the American Bankers Association Agricultural and Rural Bankers Committee, which works to advance American agriculture and the economic growth of rural America. Lake City Bank, a $3.6 billion bank headquartered in Warsaw, Indiana, is the fourth largest bank in the state.