Don't Forget the Supply Side of Agricultural Land Markets - UNL CropWatch
April 27, 2012
In a March 21 article in Cornhusker Economics, UNL Ag Economics Professor Bruce Johnson shares "the rest of the story" regarding the ag real estate market:
In today’s bullish agricultural land markets across the nation’s heartland, it is easy to attribute the climb in values to strong demand on the part of buyers wanting to invest in land to capture good returns of recent years. While true, that may be only half the story underlying the land market dynamics. Just as “it takes two to tango,” it takes the supply side of the market as well as demand to create the land market dance.
We have been following the market for many years, observing the amount of land being offered for sale in any given time period. Historically, the agricultural land market has almost always been a “thin market,” with no more than three to four percent of the land base sold in any given year. That would suggest that the average probability of any typical agricultural land parcel coming onto the market was about once every 25 to 30+ years.
More recently, however, market observers have indicated that the number of offerings for sale are even lower than these historical rates. Apparently, individuals owning land are not as anxious to sell it given the perceived limited rates of return on alternative investments, and the satisfaction of enhanced wealth in recent years from holding ownership to agricultural land.