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The annual survey has been conducted of farmland sales in 14 southwestern Minnesota counties. The survey collects bare farmland sales to non-related parties for the first six months of each year. Land values had been steadily increasing until 2014. After reaching record-high prices in 2013, the upward trend was broken as prices declined in 2014 and continued down through 2017. The summary report for this survey is available at the county extension offices in Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan, and Yellow Medicine counties. This year the increase across the 14 counties averaged 14.7 percent after a 27.9 percent increase in 2022.
Southwest Minnesota land prices peaked at $8,466 per acre then declined through 2017 to $6,340 until increasing in 2018 to $6,589 and declined slightly to $6,576 in 2019 and to $6,371 in 2020 until increasing in 2022 to $6,873 and reaching a new high of $9,950 in 2023. The largest increase year to year was in 2013 with an increase of 35.6 percent. Farmland prices decreased in one county, Lac qui Parle, but increased in thirteen counties from 2022 to 2023. Most counties went up significantly from 2022 to 2023. The largest increase was in Murray County with an increase of 37.1 percent while Lac qui Parle County experienced a decrease of 5.7 percent for the sales that met the bare farmland to non-related party transaction requirements.
Jackson County had the highest average sale price of $12,656 per acre and Lac qui Parle County had the lowest at $6,348 per acre. The average Crop Equivalency Rating (CER) for the 14 counties was 67 with the highest price per CER in Redwood County at $103.06 and the lowest in Lincoln County at $68.65 per CER. The assessed values were slightly higher than the actual sales price with the assessed value at 100.1 percent of the sales price. Historically, the assessed value would be 75 to 80 percent of the sales value. Half of the counties experienced average sales prices that were lower than the assessed values in 2023. While seven counties experienced average sales prices that were more than the average assessed values, the lowest percentage was 71.58 in Lyon County.
Each year sales vary. Within a county, land location could have an effect on these average values from year to year. The quality of the land sold within a county may be a factor in the wide swing in the prices from year to year in individual counties. The number of sales in each county varies greatly from year to year. The 14.7 percent increase is above historical increases of 1 to 2 percent. Several factors have an effect on land values. Farm incomes, grain prices, interest rates, return on other investments, and 1031 exchanges are often mentioned as reasons for the increase. Farm average incomes improved in 2019, 2020, and 2021, 2022 and are projected lower in 2023.
The 1031 exchange is for farmers or property owners who have land in an area of increased value due to location to city or development and rather than pay taxes on large gains from the sale of land they purchase like property or other farmland at a more reasonable price elsewhere, which increases rural farmland demand. The reason for increases or decreases in farmland sales prices is a combination of all of these factors. If you would like a copy of the two-page document on the trends in farmland sale prices, contact the local county Extension office at any of the 14 counties listed above.
Which direction will farmland values go depends on several factors. Supply and demand will determine this. The simple return on investment which is determined by rental rates will determine how competitive farmland is compared to other investments and this will determine the value of farmland. Corn and soybean prices were high in 2022 and declined from these high prices in 2023. This should have an impact on profits, farm rental rates, and eventually farmland values. The government program payments were minimal in 2022 and 2023. The table below indicates average land prices from 2018 to 2023.
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