Wednesday, December 12, 2012

The cure for high prices is high prices

I just came across another very interesting article written by Dan Piller in the Des Moines Register, titled "Iowa farmland prices hit new record, but boom won't last". The article shows that although farmland prices have soared in the last couple years, farm input costs have risen even faster, commodity prices will eventually come down, and interest rates will also eventually go up. Some combination of these events should lead to a slowdown in the market, or even a slow decline in farmland prices.

The article includes quotes from Mike Duffy of Iowa State University Extension, who recently published an "annual land price survey that showed a 24 percent rise to an average of $8,296 per acre in Iowa" in 2012. Check out the map below for more details - and note that the biggest increases in land prices were all in Northern Iowa, which means similar trends are likely spreading into Southern Minnesota.

Perhaps the most telling quotes in the article are from Bill Davis, chief credit officer with Farm Credit Services of America. Davis "said the increases in farmland values have been driven by three factors: strong domestic and export demand for commodities, historically low interest rates, and strong farm income."

"We believe at least two of these three factors will reverse over the next three to five years,” Davis explains. “The most likely event is a significant reduction in net farm profit levels as we see supplies respond to higher demand levels for commodities. Interest rates also are likely to increase eventually, making alternative investments more attractive than they have been recently.”

Many people remember the farm crisis of the early 80's, but not many believe that it will happen again. As the article states: "Iowa farm values soared in the 1970s in a commodity and land boom similar to today, only to crash spectacularly in the first half of the 1980s. Not until 2010 did Iowa land values return to an inflation-adjusted level of $5,770 per acre."

"Duffy said that because farmers are in better cash positions today than three decades ago, he didn’t think Iowa farmland values were vulnerable to a steep dive. “High land prices kept going higher in the 1970s, even when farm profits narrowed,” Duffy said. “That won’t happen this time.”

If you are interested in selling your farm land at high prices, please contact me. I can perform an appraisal on your land or help you list and sell your property quickly for a fair price. 

Have a great week!

Noah Hultgren

Saturday, November 24, 2012

Sell your farmland before taxes go up?

I hope you all had a safe and happy Thanksgiving! There are so many things to be thankful for!

As we now approach the Christmas season and the end of the year, the pressure is on to sell farmland before tax rates go up. I read an interesting article in the Des Moines Register about the opportunities for selling farmland in the current environment. It was written by Dan Piller, and is included here:

Pressure's on to sell farmland before end of the year
Written by Dan Piller
Des Moines Register

DENVER, IA. — The clean, placid appearance of post-harvest Iowa farmland appears to be far removed from the messy fog of Congressional politics and the fiscal cliff.

But pressure is intense to sell land before Jan. 1 when, if Congress doesn’t intervene, capital gains taxes will rise from 15 percent to 23.8 percent and deductions on estate taxes will drop from $5 million to $1 million.

“If there is a chance that you may want to sell your farm, then you should think hard about getting it done before the end of 2012,” said Des Moines lawyer Bill Hannigan of the Davis Brown firm. On the front lines of Iowa’s farmland boom, farmers and landowners are filing into small-town meeting halls for auctions with one eye on the tax debate in Washington.

“The tax changes are on everybody’s minds. We have a sale every day, except Sundays, between now and Thankgiving,” regional sales manager Sam Kain of Farmers National Co. said before selling 169 acres of Bremer County farmland from the estate of Alvin and Maxine Walther on the day before the election.

“I’ve been in this business for 30 years and I’ve never seen it this busy,” Kain said.

The extra inventory of land sales hasn’t cooled off Iowa’s hyperheated farmland boom. In October the state set a record price of $21,900 per acre in Sioux County.

When the auction began at Denver, auctioneer Jeff “The Dirt Doctor” Obrecht reminded the gathering: “Land like this comes along just once every 50 years.”

Obrecht didn’t really need to entice bidders further. The Walther land bore a Corn Suitability Rating of 87, which attracts farmers to an auction like the opening of a Tom Hanks movie at the multiplex. So it wasn’t much of a surprise that the winning bid of $15,700 per acre from neighboring farmer Ken Eggena came after just 30 minutes of auction, with a break included.

Duane Walther, one of six children who watched the sale of the family land, reflected wistfully after the sales concluded. “Dad bought the first parcel of land for $100 per acre in 1946,” Walther said. “Mom died earlier this year and we are settling the estate. I just think of dad up there and he must be amazed at the price of the land.”

A week earlier a similar farmland sale played out at Gilbertville, south of Waterloo, where a 102-acre farm sold for $15,600 per acre. The sale was triggered by the death of Maxine Even, who had survived her husband, Cletus. The land was in the Evens’ estate and none of the 13 surviving children could afford today’s land prices.

“Some of the siblings are happy and some, who wanted to keep the land in the family, aren’t,” said a son, Gene Even, who lives on an acreage near the farm. Cletus and Maxine Even had paid $31,740 for the 102 acres on March 1, 1965. Almost a half-century later neighboring farmer Ben Riensche made a successful $1.6 million bid at auction for the same ground.

The drought last summer apparently added more fuel to Iowa’s farmland boom, especially when Iowa’s fall harvest yields were better than feared. During a break at the Gilbertville sale, auctioneer Troy Louwagie of the Hertz Farm Management Co. said: “When the drought hit last summer, who would have believed that land prices would stay this high?”

“But most farmers ended up with yields better than expected, which just reinforced the idea of how valuable Iowa farmland can be.” So strong is the demand for Iowa farmland that even the less desirable, sandy land is going for top prices.

A 136-acre parcel near Madrid owned by the James and Beulah Duling estate sold for $6,200 per acre. That’s hardly the stuff of headlines in an era of $15,000-and-up prices, but it’s well above the state average of $5,064 per acre as recently as 2010.

Son Carl Duling, a retired teacher in Madrid, was satisfied with the sale. “Dad paid $124 an acre in 1961,” Duling said. “The land is sandy. Not top quality, but it brought a good price. We’ll use the money to pay for mom’s nursing home expenses.”

The high prices paid for Iowa farmland inevitably conjure up memories of the extended Great Depression in agriculture during the 1920s and ’30s and the farm crisis of the 1980s. As rural prophets warn constantly, both of those calamities were preceded by the same kind of commodity and land price boom that Iowa has enjoyed since the middle of the last decade. But others point out that this time is different, in part because corn prices are above $7 per bushel and expected to stay there, if the U.S. Department of Agriculture forecast is to be believed.

“The price of corn is high and interest rates low and there is a shortage of alternative investment,” Kain said. Lenders who were overextended three decades ago have battened down the hatches this time. Farm Credit Services of America has imposed a cap of $5,200 per acre on farmland loans, which would have leveraged loans on the Walther and Even sales at 33 percent.

“Back in the 1980s, you saw lending going 80 percent or more of the value of the loan,” said Brian Thielges of Iowa Farm Finance Corp. of Des Moines, who originates and packages farm loans for Federal Agricultural Mortgage Corp., or Farmer Mac. “Today, you seldom see loans going more than 60 percent or more of the value, and many are less,” Thielges said.


If you are interested in selling your farmland soon, please contact me at 320-894-7528 or and I can help you out.

Noah Hultgren

Happy Thanksgiving!

Thursday, November 15, 2012

Farmland in Iowa

In the wake of the reported $21,000 per acre sale of farmland in Iowa, several news outlets have taken a closer look at the ripples in the Iowa farm market. One of the most thought-provoking pieces I've come across was recently published on Bloomberg, written by Tim Jones and Elizabeth Campbell.

The title is "Iowa Farms Minting Millionaires as Rich-Poor Gap Widens", and it covers everything from farmland prices to rental rates to the Beverly Hillbillies. It's a thoughtful, interesting article that sheds light on several different aspects of the changing market and the income inequality it is producing.

A couple things that stuck out to me - the amount of people available for the bidding in a farmland auction that ended at $14,300 an acre. The article then includes this provocative statement "Farmland auctions in Iowa now resemble a dressed-down spectator sport with Sotheby’s prices, a reflection of the yawning divide that has opened in some of the most bountiful stretches of rural America. Farm earnings in the state and throughout the U.S. increased at eight times the rate of nonfarm wages from 2008 to 2011, fueling resentment and straining the social fabric of places with deep egalitarian roots."

The article also includes this quote from David Peters, a sociologist from Iowa State University, “Iowa had had historically low levels of inequality, but now it is skyrocketing. Today you have far fewer farmers and a small number earning larger and larger incomes. It doesn’t spread through the economy like it used to.” The authors share a lot of statistics on the strength of the recovery seen in agriculture, especially as it compares to the stall seen for many other rural residents.

Another thing that caught my attention - it seems that "those buying up the land are more likely to be locals than just a few years ago. The percent of Iowa farmland purchased by investors peaked in 2005 at 39 percent before falling to 22 percent in 2011, according to Michael Duffy, an agricultural economist at Iowa State University. Farmer purchases rose in that period to 77 percent from 59 percent," according to the article.

Their research showed that an acre of land in O'Brien County, which is just one county off the border with Minnesota, is now valued at $9,513 in 2011, a 33% increase since 2010! These price increases will likely start spreading into Minnesota in the near future, especially with the success of the last couple farming years.

However, the article also reminds us about the farm prices in the 1980s, and makes the point that this likely can not last forever.

Based on these trends, now would be a great time for a farmland appraisal. I would be happy to work with you on an appraisal, or to help you sell your farmland for a market price. Please call me at 320-894-7528 or e-mail me at and I will help you out.

Have a great week!
Noah Hultgren

Saturday, October 13, 2012

Harvest Higher Land Prices

Harvest is flying along this year - the weather has really been cooperative. I can't remember another year when things have run as smoothly and gone as quickly. I saw a progress report from the USDA that showed the whole state is enjoying a fast harvest.

According to the last crop progress report, over 95 percent of the state's soybean crop was harvested, which is way up from just 69 percent last year and a 55 percent average from past years. Likewise, corn was nearly 80 percent harvested, compared to 16 percent last year and only 11 percent on average.

The sugarbeet harvest is also running ahead of average, while the dry bean harvest is pretty much complete.

This should be another good year for agriculture, which should again be good for land prices. I've seen a lot more listings for farmland auctions recently, which can be a great way to get a great price for your land. North Central Realty offers auction services for farmland and often brings in high prices.

As farmers continue to bring in good yields in record times, the opportunity to sell can also be harvested. Please contact me at or 320-894-7528 to learn more about how I can help with your land sale.

Have a great week,
Noah Hultgren

Monday, September 17, 2012

Minnesota corn yields are the best

I saw an excellent article in the Pioneer Press by Tom Webb the other day about how Minnesota's corn yields are the best in the Midwest. Thankfully our state - especially our region -  wasn't hit as hard by the drought as states like Iowa and Illinois. 
But not everyone is receiving the same results. In West Central Minnesota, our yields look good and the corn is relatively dry, which should make for a good harvest. According to Webb's article, data so far show average yields of 156 bushels an acre, but the range is anywhere from 20 bushels to 200 bushels per acre. 
According to the article, "the U.S. Department of Agriculture issued its September crop production forecast. After the worst drought in decades, U.S. corn production was forecast to be a disappointing 123 bushels an acre. Minnesota has clearly fared far better than most states. Its forecast of an average 156 bushels an acre is the highest among the major corn-growing states, and it means $9 billion worth of corn awaits the combines -- a colossal payday for many farmers this fall."
Combine that with corn prices that have risen near $8 a bushel,  and this should be a pretty good year for farmers with good corn yields. That should raise farmland sales and rental prices for the next year. If you'd like an appraisal on your farmland, I'd be happy to give you a better idea of your current value, and maybe some idea of where the market is going. 
If you're ready to sell your farmland, I am an expert in farmland real estate sale including 1031 tax deferred exchanges. Our company also does farmland auctions, which have been netting outstanding prices for our sellers this year. 
Please contact me at 320-894-7528 or for more information or to set up an appointment. I'd enjoy the chance to work for you.


Wednesday, August 29, 2012

Crop Insurance

Last week I read a thoughtful blog post from Farm Policy Facts, a "coalition of farmers and commodity groups created to educate Congress and Americans about agriculture's contribution to a strong and vibrant United States." They focused on some of the misunderstandings about crop insurance.

One popular misconception is that farmers purchase crop insurance policies to guarantee they will make a profit - which as the author states is "an assertion that anyone with any experience in the high-cost, high-risk farming business has immediately dismissed as ridiculous."

The blog post includes a telling quote from Jason Williamson, who is a crop insurance agent from Payne, Ohio, which provides some levity to the argument: "Do you think that drivers who purchase car insurance are secretly hoping for a car wreck to get a check from the insurance company? It's an absurd idea. You purchase insurance for protection, not to make a buck."

Every farmer I know is dedicated to their craft and would prefer to never need crop insurance. But like with car insurance, it is a prudent aspect of business that can help protect against things we can't control - like the weather, or droughts. After a house, a car is often a family's largest expense/investment. It would be hard for many families to simply replace a car after a car wreck if they didn't have some form of insurance; imagine how hard it would be to replace an entire crop!

Thanks to Farm Policy Facts for sharing this meaningful information with people!

Noah Hultgren

Monday, August 13, 2012

Drought taking a toll on corn crop

Though corn crops are looking good in our immediate area, many farms to the south and west are going to struggle with poor yields this year as the drought continues to spread. I read an article from Jim Suhr of the Associated Press (USDA cuts corn outlook as drought takes toll) that detailed the current status of the nation's corn and soybean crops, which is dire in many parts of the country.

According to the article, the USDA dropped its projection of national corn production almost 20 percent from its forecast just one month earlier - from nearly 13 billion bushels to 10.8 billion bushels - due to the drought. That would be the lowest amount since 2006, and 13 percent lower than last year's result. The USDA is also "predicting what could be the lowest average corn yield in more than 15 years as the worst drought in decades continued punishing key farm states."

It's troubling because the downward revisions are in stark contrast to the year's projections, as "corn farmers forecast a record year when they planted, sowing 96.4 million acres - the most since 1937. But the USDA now forecasts the area to be harvested at 87.4 million acres."

Likewise, "soybean production is now forecast at 2.69 billion bushels, a 12 percent decline from last year and well off the 3.05 billion bushels the USDA had expected last month. Expected yields on average of 36.1 bushels per acre would be the lowest since 2003."

This will likely lead to increased food prices, especially for beef and pork. The prices will likely also rise for farmers, with corn and soybean markets climbing.

The high corn and soybean prices may sustain the high farmland prices we're currently seeing; or it may lead to a change in the next year as the market starts to correct itself. If you're interested in selling your farmland, or getting a new appraisal to see what your farmland is now worth in this market, please call me at 320-894-7528.

Noah Hultgren

Monday, July 30, 2012

30-year mortgage rate reaches new low!

I saw several articles today related to the record low 30-year mortgage rates, which fell to 3.49 percent - the lowest reported in the last 60 years. According to Freddie Mac, it's the first time that average rates on 30-year mortgages have been below 3.5 percent since the 1950s.

Likewise, the rate for 15-year mortgages dropped to 2.8 percent last week, from the previous record of 2.83 percent, which was reached the prior week. In addition to helping encourage home sales, these record low mortgage rates could also help encourage other spending in the economy if more homeowners decide to refinance.

As the economy has improved, the housing construction industry has picked up in the last year. Analysts say that home prices have reached the bottom are are starting to increase in most markets, and home sales activity will follow suit.

If you are ready to sell your house, please contact me at or 320-894-7528.

Have a great week!
Noah Hultgren

Tuesday, July 3, 2012

Current Corn Crop

I just read an interesting article in the St. Cloud Times about the strength of the current corn crop, along with

Here's the article, published in the St. Cloud Times on July 3:

Minnesota corn farmers could see strong crop, good prices

Minnesota farmers are enjoying the nation's best corn crop, the U.S. Department of Agriculture said Monday. But that doesn't mean it's worry-free on the farm.

In its weekly update, USDA said 82 percent of Minnesota's corn was rated in good or excellent condition. For the nation as a whole, just 48 percent of the U.S. crop reached that threshold.

In other corn-growing states, a widening drought and scorching heat have stressed the crop, making grain markets nervous. In Chicago, corn futures rose again Monday, with the September contract rising more than 22 cents a bushel, or 3 percent. Grain prices have climbed nearly 30 percent since mid-June.

Minnesota farmers planted record corn acreage this year, so there's at least the possibility of a rare confluence of events: record acreage, a strong price, and a high yield. But this week's arrival of scorching weather, coupled with forecasts of less-than-average rainfall in July, have also brought new worries.

"In southwest Minnesota, we're starting to see the signs of moisture stress," said Liz Stahl, a crops specialist with the University of Minnesota extension in Worthington. "This week's prediction is high temperatures and not much rain in the forecast, so we'll see."

But for now, most of the Minnesota corn looks lush green and unusually tall. The average corn plant in Minnesota is now 49 inches tall, or roughly chest-high -- well beyond the adage that corn needs to be "knee-high by the 4th of July."

Said Stahl, "I was out in a field today and it's over your shoulder, so it's certainly way beyond knee-high."

Dave Nicolai, a corn specialist with the University of Minnesota, said that "the good news right now is that the crop in Minnesota looks very good."

But growers remain nervous about the heat and dry weather, especially in the next couple of weeks when the critical tasseling stage arrives.

"If we get missed by rainfall, things will go from good to stressful in a short amount of time," Nicolai said. "This story could turn around."

Because it should be another good year for crops, this should be another good year for farmland values. If you would like an appraisal or advice on when to sell your farmland, please contact me at 320-894-7528.

Noah Hultgren

Wednesday, June 20, 2012

Farmland prices setting new highs

There was a really interesting article in the StarTribune last weekend about how "the agriculture industry is riding high, leading to a wave of expansion driving up the cost of cropland. Ever-new record prices raise worries the bubble is about to burst."

Please read this excellent story, written by Jennifer Bjorhus and Mike Hughlett, about the recent rise in farmland prices:


Mick Schmiesing strides into the local rec center in a plaid shirt, Massey Ferguson tractor cap and old tennis shoes. It's auction day, and he's ready to make a play for 80 acres of Blue Earth County soil. Bidding starts at $5,000 an acre.

A year ago, that would have been about the going price for good land in this southern Minnesota county. On this day in March, the bids climb much higher, past the county record set just a month earlier. After a few tense minutes, Schmiesing wins out with an offer of $8,375 an acre. He looks a bit stunned -- he just spent $670,000. Is the land worth it? "I have no idea," he says. "I'll tell you in five years."

Across Minnesota and the Midwest, concerns are rising that farm values are climbing too high. Farmers, bankers and investors have put huge sums of money on the line, in the hope that boom times for agriculture will last.

Land prices have reached levels not seen in a century, even adjusted for inflation, mainly because historically high prices for commodities such as corn and soybeans have enabled farmers to generate strong profits. Good times are spurring farmers to expand their holdings and newcomers to buy in.

But economists and analysts wonder whether farmland will continue to provide the kind of payoff that justifies the high-dollar purchases. Or whether farm prices are vulnerable to the kind of momentum shifts that hit dot-com stocks and then housing.

"If [prices] keep going up at the rates at which they have been going up, they will not be justifiable," said Brent Gloy, director of Purdue University's Center for Commercial Agriculture.

Farming's last golden era also started with high commodity prices and a big run-up in land values -- only to collapse into what became the 1980s farm crisis. Legions of farmers went bankrupt, and land values plummeted, devastating rural economies.

Many observers say farmers are at less risk this time because they aren't carrying as much debt as they were in the '80s. But signs of overinflated land prices have people on guard that the market may be peaking.

"As a conservative banker, I'm concerned every day," said Michael Bahl, principal agriculture industry specialist at Wells Fargo Bank in Owatonna. He thinks Minnesota farmland that has reached $8,000 to $10,000 an acre is "too high."

Purdue's Gloy watches the "value-to-cash rent multiple" of farmland, which indicates how much buyers are paying for each dollar of rent they could collect for the land. A high number suggests that buyers may be overpaying.

The ratio hit a high in Minnesota in 2007 and remains at levels not seen in 45 years, according to a Star Tribune analysis of U.S. Department of Agriculture data. It's at similar highs in Iowa, Illinois and Indiana and hasn't fallen back in those states, according to Gloy's analysis. "We're in uncharted territory," Gloy said.

'A very good age'
Farming is the ultimate hard-luck profession, forever at the mercy of weather and faceless commodity markets. In recent years, though, the rewards for many crop farmers have been bountiful.
Sitting in his home office in southwest Minnesota overlooking two large shiny new steel corn bins, Gene Stoel sums up the past couple of years: "It's been very easy to make money," said Stoel, 57, a veteran corn and soybean farmer near Lake Wilson. "This has been a very good age for farming."

Minnesota crop farmers had two of their most profitable years on record in 2010 and 2011, posting an annual median net income of over $145,000 after farm expenses, according to data from the University of Minnesota and the Minnesota State Colleges and Universities. Surging income has helped put farmers in a financial position to expand.

Last fall, Stoel bought 160 acres, increasing the size of his farm by about a quarter. "You've got to keep growing, or you'll be left behind," Stoel said. He paid $6,300 an acre. Three years ago, he bought an 80-acre parcel. It's a little less fertile than his recent purchase, but it cost only $3,200 per acre.

Tom Haag, a 60-year-old corn and soybean farmer near Eden Valley, expanded last year, too. He bought 200 acres that almost doubled the size of his farm as part of an effort to bring his son into the family business. Haag paid just less than $4,000 an acre for land that probably would have cost 30 percent less three or four years ago.

"I was not feeling good for three or four days," Haag said. "I've never spent that much money in my life. ... I want a couple of good years because I don't want to go backwards."

Last year the average price for an acre of cropland jumped 13.5 percent in Minnesota and 9 percent nationally, according to the U.S. Department of Agriculture.

One factor that adds to the pressure on prices is that there just isn't much land for sale. Only 1 percent of Minnesota's farmland generally comes up for sale in a given year. And despite hot demand, the number of farm real estate sales has actually been falling, hitting its lowest point in decades, said University of Minnesota economist Steven Taff, who tracks farm real estate sales across the state. For a farmer, land coming up for sale next door can be a once-in-a-lifetime opportunity.

Taff said he suspects sellers, optimistic about high prices, are taking land off the market if they don't get the whopper offers they anticipate. He said most of the buyers are farmers looking to expand near their own farms -- "neighbors cannibalizing the neighbor's farm." The instinct is always to add more land. "There's a lot of manly man stuff," Taff said. "You want to own more land because that's the way we do things."

A new price era
Farmers can thank much of their current good fortune to the combination of historically high commodity prices and historically low interest rates.

High prices for corn and other grains, of course, boost farm income. Low rates make borrowing cheaper and intrinsically raise the value of a farm. Farmers entered a new price era about five years ago. Until about 2007, the long-term average price for corn -- going back at least 30 years -- was around $2.50 per bushel. Then prices for corn and other commodities began climbing in what experts see as a structural change driven by global food and fuel demand.

The thirst for corn-based ethanol has risen sharply. Plus, the swell of people entering the middle class in countries such as China and India has buoyed demand for meat, and thus for soybeans and corn for animal feed.

Growing world demand for food has come at the same time that global grain supplies have been tight. With subpar weather, U.S. corn yields have been below long-term trends in recent years. The result: corn above $5 and soybeans around $13 -- both off yearly highs but handily above historical benchmarks. Said Stoel: "I never thought it would get this good."

Will it last?
There are so many risks that Bahl, the Wells Fargo banker, joked he can't list them all.
"Any one thing could cause that disaster," he said.

Interest rates will inevitably rise at some point, although the Federal Reserve has made clear that it intends to hold rate targets low until at least 2014. Ethanol demand has slowed, and farm economists say that without federal policy changes, the days of go-go growth for the corn-based fuel are gone.

"Corn is land, and land is corn," said Michael Swanson, an agricultural economist with Wells Fargo in Minneapolis. "If we have $6 corn prices going forward, these land prices are fine. We really need to have a couple of monster crops to see how low these prices might go."

Producers themselves, and the age-old specter of such "monster crops" pose their own threat. Farmers worldwide, not surprisingly, react to higher prices by planting more, which in turn can lead to bumper crops that inevitably lead to price declines. U.S. corn farmers were expected to plant more acres in corn this year than any time since 1937.

"In the past, farmers have tended to produce themselves out of prosperity," said Jason Henderson, an economist at the Federal Reserve Bank of Kansas City.

Then there's rising costs for farm essentials like fertilizer and seed. Indeed, despite Minnesota crop farmers' banner year in 2011, profits were still down almost 10 percent from 2010 due to higher costs.

Bankers are busy charting the shrinking profit margins. A sudden spike in oil prices, for instance, could alter the farm equation. Stoel, like many farmland watchers, is bullish on world demand driving higher prices. As chairman of the Minnesota Soybean Research and Promotion Council, he's been to Asia and seen the success story firsthand: "As they increase income, the first thing they want is a better diet." Demand for more meat spells demand for more animal feed. Still, he cites a slowdown in emerging nations as his biggest worry.

Gloy, the Purdue economist, said he's concerned that global growth "is taken on faith."

A precedent in housing?
The inevitable comparison for farm prices is the housing bubble. But home values surged well beyond people's incomes, a warning sign for trouble. On the farm, commodity prices and incomes have soared at similar rates to land prices.

And economists are quick to point out that farmers are far less leveraged today than in the 1980s, when high debt levels greatly amplified fallout from the agricultural downturn. Debt levels, while rising over the past decade, are a bit less than half of what they were during that crisis.
That could change, of course, if historically low interest rates inspire more borrowing. Will farmers and bankers go on a credit spree?

"That's the key question," Henderson said.

Farmers and bankers alike say lenders are more conservative than during the previous boom. Back in the late 1970s and early '80s, Haag said you could ask a bank for $50,000, only to hear, "How about $100,000?" And they'd let borrowers put considerably less of their own cash into a deal.
Haag made it through the '80s farm bust intact but saw collapsing farm values firsthand. That experience still guides him, he said.

"My group that went through it -- the '80s -- we are being very careful. You saw guys who were very good farmers overextend themselves and lose it."

Some of the state's largest farm lenders, such as Wells Fargo, AgStar, Rabo Agrifinance and Bremer Bank, said they generally lend up to 60 to 65 percent of the land's value -- although that limit is coming down, some said.

The farmer has to provide the rest with cash, or with a combination of cash and mortgaging land the farmer already owns outright. In some cases, pledging already-owned land as collateral enables farmers to buy land with zero cash down, bankers said, although that's not common.

Bahl, at Wells Fargo, said the bank likes to have 10 to 20 percent in cash. "We're not going to let the farmer overleverage themselves," Bahl said. "Bubbles are created when people overleverage themselves and put themselves in a bad position. Conservative lending practices are not allowing that to happen."

Paul DeBriyn, CEO of AgStar Financial Services Inc. in Mankato, said farmers are better managers now, with better technology available to them. Prices will come down, DeBriyn said, but "it's hard to imagine we'd have anything close to the '80s."

The risks aren't lost on farmers. Schmiesing, who just bought the 80 acres in Blue Earth County to grow more corn, said he's perfectly aware of them. He just doesn't think corn prices will fall "for a while." He and his brother, who run a hog operation, had to mortgage some of the 1,500 acres they farm with their father to pay for the new land. He said he probably wouldn't have bought if it hadn't been right next door.

"It's just like going to Morton, you know," said Schmiesing, referring to the Jackpot Junction Casino in Morton. "That's what farming is, it's a gamble every day." "It's good right now. I don't know how long it will last."


If you're interested in selling your farmland now due to the high prices, or would just like an appraisal to get a better feel for the market, please call me at 320-894-7528 or e-mail me at I can help you make the most of your farmland situation.

Noah Hultgren

Monday, June 4, 2012

Farm Fresh

USDA study find that farm fresh foods are less expensive!
I read a recent study from U.S. Department of Agriculture that challenges the myth that unhealthy foods are inexpensive and easy to get while healthy, farm fresh foods are expensive. A blog post at Farm Policy Facts lays out the argument contained in the study:
According to the study, titled “Are Healthy Foods More Expensive,” much of the problem stems from the fact that "previous assumptions about junk food being less expensive were based on a biased analysis that calculated food costs based on the price per calorie."
“Using price per calorie doesn’t tell you how much food you’re going to get or how full you are going to feel,” said Andrea Carlson, scientist at the USDA’s Economic Research Service and an author of the study. Carlson and her team analyzed 4,439 foods in three different ways – price per calories, price per edible gram and price per average portion.
This should make you think twice about what you're buying at the grocery store, and make you question what you're complaining about with food prices.
Take care,
Noah Hultgren

Saturday, May 26, 2012

Record Lows for Mortgage Rates

Mortgage rates hit new record lows this week, with the average rate for a 30-year fixed mortgage falling to 3.78 percent, according to Freddie Mac. The average 15-year rate held at 3.04 percent, which is also still a record low.

I prefer to work with local lenders, but here's a link to current rates from to give you an estimate of today's rates and the estimated costs:|1000

With borrowing costs so low, now is a great time to buy a new house. National reports show that the housing market is improving, with more houses being sold and house prices increasing slightly. The number of people refinancing their current mortgages was also rising due to the falling mortgage rates.

We've been busy in our region, with good job prospects and people moving into the area. I would love to help you sell your house or buy a house if you're looking to change your current situation. I have lots of good experience working with clients.

Call me at 320-894-7528 or e-mail me at and I will work hard for you.

Noah Hultgren 

Thursday, March 29, 2012

Minnesota Corn Growers

Where did winter go? If you are like me, you enjoyed the abnormally warm and dry winter. After last winter, we needed a vacation! Speaking of vacations, I had the opportunity through the Minnesota Corn Growers Association to do some traveling in March.

In early March, my beautiful wife Paula and I flew to Nashville to be a part of the Commodity Classic. This is the Super Bowl of farm tradeshows in the U.S. During this week, meetings of the major commodity groups took place. There were 2 sessions of Corn Congress in which I attended as I am a voting delegate for Minnesota. All states that belong to the National Corn Growers Association had representation. The main thing that happens in Corn Congress is going through our resolutions book and voting what we do and don't stand for. The tradeshow had over 400 exhibits and saw over 6,000 people through the doors. Needless to say, I had a tough time seeing everything there in just a few days. All of these events were held at the beautiful and spacious Opryland Resort. When not in meetings, we walked next door to the Grand Ole Opry for an evening. I'm not a big country music fan, but really enjoyed the ambiance and mystique as we took in 6 different performers.

In mid-March, a small group from Minnesota Corn along with the Southwest Council, which comprises commodity groups, lenders, and farmers from the southwest part of the county ascended on Washington D.C.  Through our national lobbying firm, Combest and Sell, we were scheduled to meet with over 100 legislators and staff in a 2 1/2 day span. There were 25 people in our group and as such got divided into different teams to take on the many appointments. I believe we made an impact on the legislators and staff as we had a strong and important message to deliver. We made it clear that we need a new Farm Bill, not to harm crop insurance, and letting each producer choose their type of crop insurance knowing one size doesn't fit all. There were other issues we touched on, but that was our emphasis. Although ag is 1/4 of 1% of the national budget, we have seen disproportionate cuts already made, with more sure to come.

The Minnesota Corn Growers' Day on the Hill was also in mid-March. This is a time when many of our directors schedule visits with representatives and senators in their district. We had the opportunity to meet with Ag. Commissioner Frederickson at the Capitol as well. The overall impact again when visiting with legislators is big. They really get to hear what the corn growers are all about and it's important.

I hope to be done with travel for a while now. We have different state and county events coming up, but at least I won't have to be out of state when we are planting that 200 bushel corn!


Thursday, March 8, 2012

Farmland Prices Have More Stability Than Recent Prices May Show

I read with great interest this recent post on the excellent website, posted by Stu Ellis, talking about recent trends with farmland prices.

Here is the complete article, which can also be read by clicking here:

"Recent data by the Federal Reserve banks indicate that Cornbelt farmland values had risen between 22% and 25% during the past year.  That rate of increase had not been seen since the mid-1970’s.  USDA Wednesday released 30 year data that does not come close to indicating such rapid ascents in land values, but does raise a question whether there is a bubble within land values.  Such a possibility will raise concerns among policy makers who are considering a new Farm Bill.  How will that affect their thinking?
USDA’s land value study looks at a longer term trend in farm real estate values.  The economists report, “Recent sharp increases in farmland values raise questions about whether farmland prices have reached levels that cannot be sustainably supported by expected agricultural returns.”  They say the recently established prices are not occurring under the same conditions that contributed to the financial crisis of the 1980’s.  And they add that while income and land values were linked in the first half of the last century, that fact has become less so, and recently there is little correlation on a national level.

In relation to rental rates, farmland values have increased faster than rental rates, but that has been a 45 year long trend.  Based on cash rents, it would only take 14 years in 1951 for farmland to pay for itself, but that had risen to 33 years by 2007.  “Studies have found that farmland prices are more volatile than rents.  Rising incomes in the nonfarm rural economy in recent years may also have contributed to increases in farmland values, with a more limited impact on rents.”  While some farmland is sold to capture the capital gain benefits, other farmland is rarely sold because of nonfinancial ownership issues.  Only one half per cent of farmland is sold annually.

The current period of low interest rates has two positive effects on farm real estate values, according to University of Illinois economist Gary Schnitkey.  His research is cited by the USDA economists, who say, “First, for those who have to purchase land with debt capital, it lowers the total cost of purchasing land.  Second, interest rates represent returns on competing fixed investments, and when they are low, farmland looks more attractive as an investment alternative.”

The USDA report says farmland values were supported by earnings in 2009 and 2010.  “When farm real estate values divided by the capitalized value (price-to-value ratio) exceed 1, farmland values are not supported by the stream of cash flows the farmland could earn.  During 2004-08, farmland values were not justified based on farm earnings alone.  Subsequently, market signals indicate that farmland was somewhat undervalued at current interest rates, so it is not surprising that farmland values increased in 2009-10.”  They also report, “In 2010, the price-to value ratio was about 0.9 based on current rates. If interest rates were to jump to the long-term average, the price-to-value ratio would sharply increase to over 1.5, signaling that land values would not be supported by the stream of rents the land could earn at historical interest rates.”  In the 1980’s interest rates did rise rapidly, causing land values to fall sharply.

Current increases in land values can be attributed to the demand for crops as both food and energy sources, which have kept stocks tight.  There has also been a strong export demand fostered by the weak dollar.  But the USDA economists warn that “the size of the U.S. trade deficit increases the risk of investing in farmland.  If other countries become less willing to cover the U.S. deficit, interest rates could climb and debt-financed real estate values could fall.”

As realtors talk about “location,” the USDA economists report that is true for farmland, particularly when higher values are show to be closer to farm markets.  Since transportation costs increase with distance, the shorter distances to an elevator or other commodity terminal will generate a higher land value.  In recent years the establishment of a community ethanol plant will raise the price of corn, and that raises land values in the region.  Additionally, some locations have seen higher land values because of the level of farm program payments.  “Payments that are certain might be accounted for differently than payments that are realized only under low prices, yields, or revenue. Production flexibility contract payments— direct payments to producers with “base acreage” until the program was replaced in 2002—have been shown to increase cropland values.”  And they add, “There are considerable regional differences in the ratio of payments to cropland values.  Much of this regional diversity is likely based on differences in what crops are, and have historically been, grown.”

Another dynamic pushing up farm real estate values is the proximity to urban areas.  “To acquire land for nonagricultural purposes, developers typically must bid higher than the agricultural production value of the land. As a result, even a limited number of conversions of farmland to urban uses can lead to generally higher farmland values in areas influenced by urban demand for land.” 

When researching who owns farmland, USDA found the most recent estimate was there are 2.2 million land owners, a number that will have an impact on farm operator decision-making, such a production decisions, technology adoption, and conservation practices.  Over the period from 1964 to 2007 the amount of farmland that is rented ranged from 34 to 43%, but that has remained below 40% in recent years.  While USDA has a good perspective of farm operators, much less is known about farm owners, particularly those who are not involved in operations.  “In 1999, 4% of non-operator landlords owned at least 1,000 acres of farmland, and collectively they controlled 44 percent of all acreage owned by non-operator landlords. However, about 68% of non-operator landlords owned less than 180 acres each; these landlords owned 18% of the land owned by non-operator landlords.”

Because of the attractiveness of US farmland to foreign nations needing food, questions frequently arise about foreign ownership, a statistic that has changed relatively little over time.  As of February 2009, only 1.7% of privately owned land in farms was owned by foreign interests. The majority of that is timberland owned by logging companies with ownership in either Canada or the Netherlands.

In their conclusion, the USDA economists address the question of land price stability and farm policy decisions.  They say, “Coupled with questions about the likely stability of farmland values are questions about whether active farmers benefited from the recent increases in those values. With about 40% of farmland being rented, and with more than 30% being rented from non-operating landowners in several regions (largely the Midwest and Pacific), it is clear that non-operating landowners play a significant role in U.S. agriculture. Not only do non-operators reap some of the benefits (and bear some of the risks) of changes in farmland values, land owned by non-operators is managed somewhat differently—for example, such lands may be less likely to be enrolled in conservation programs.”
Farmland values have risen rapidly in the past year, representing significant asset values for owners and questions about rental rates, which have not risen as fast.  Among the reasons for higher values are farm commodity prices, relationship to markets, including new markets, and government policies.  Stability of farmland values will depend on demands of non-operating land owners, plus the forces working on commodity values."
What a useful article! I would love a chance to talk with you about farmland prices in our region. Please give me a call at 320-894-7528 or e-mail me at for more information.
Noah Hultgren
The FarmlandMan

Thursday, January 26, 2012

2011 was the Worst New Home Sales Year on Record

I saw an article in the StarTribune today stating that 2011 was the worst new home sales year on record, at least dating back to 1963. New homes simply weren't as appealing to homebuyers, especially as foreclosures and short-sales continued to clog the market. However, with mortgage rates at historic lows and the economy picking up steam on the road to recovery, many analysts believe that 2012 will be better.

According to the article, sales of new homes rose in the fourth quarter of 2011, as did sales of previously occupied homes. Despite the slow market, data show that home construction also built up in the last three months of 2011.
The article quotes Ian Shepherdson, the chief economist at High Frequency Economics, who said easier lending requirements, historically low mortgage rates and improved hiring all point to consistent, albeit slow, rises in sales in the coming months. "A sustained rise in new home sales is imminent," he said. "Homebuilders say so too, and they should know."

However, many economists also warn that the housing market is still near the bottom, and has a long way to go to get back to health. As noted above, many builders say that a "key reason for the dismal 2011 sales is that builders must compete with foreclosures and short sales — when lenders accept less for a house than what is owed on the mortgage."

Thankfully, we didn't suffer the same housing bubble here as in other parts of the state and nation. Our home values have remained more steady, making now a great time to buy or sell your house, especially with the low mortgage rates and pent-up demand from buyers.

If you are looking for a competent, professional real estate agent who is easy to work with and eager to help you make a great housing decision, please call me 320-894-7528. I would love to help you take advantage of these low interest rates, affordable options, and improving housing market.

Noah Hultgren

Thursday, January 12, 2012

New Year, New Lows

Happy New Year everyone!

New low rates for 30-year mortgages have come with the New Year. I just read an article from the Associated Press about how "Fixed mortgage rates fell once again to a record low, offering a great opportunity for those who can afford to buy or refinance homes."

According to Freddie Mac, the 30-year fixed mortgage rate fell to 3.89 percent, while the 15-year fixed mortgage rateinched down to 3.16 percent. That was the lowest rate on record, which have been kept since the 1950s.

The article goes on to state that "Builders are hopeful that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose in December to its highest level in more than a year."

However, the article also acknowledges that fewer people have been able to take advantage of the low rates because of high unemployment rates and stagnant wages. Our area has fared better because of the strength of the farm economy, presenting a unique opportunity for buyers in the region to take advantage of lower sales prices AND lower rates.

If you are ready to buy a house, please give me a call at 320-894-7528.

Take care,
Noah Hultgren