Missouri sets new benchmark in farmland market

By Blake Jackson

In a remarkable turn of events, a 115-acre farm in Saline County, Missouri, recently sold for an astonishing $34,800 per acre, shattering the previous record held by Iowa at $30,000 per acre. This rapid sale, which concluded in a mere 15 minutes, was the result of a fierce bidding war between two farmers. The victor, Jeff Baxter from Carroll County, Missouri, is not an investor but a neighboring farmer.

The sale has raised questions about the factors driving such high land prices. Here are five motivations that farm managers know can impact sales and push prices higher:

• Livestock operations: Livestock operations can play a pivotal role in influencing record land sales. Farmers need land to spread manure from their livestock, and the cost of transporting manure is high. This drives up demand for land near livestock operations.
   
• Tightly held markets: Scarcity drives value. In some communities, farmland is tightly held by several families. When land comes up for sale in these areas, buyers may be willing to pay a premium, especially if they have a personal connection to the land.
   
• Tax-deferred exchanges: Property owners can defer capital gains taxes by reinvesting sale proceeds into a "like-kind" property, known as a 1031 exchange. This mechanism can notably influence farmland prices. Investors, eager to capitalize on these tax benefits, may be more inclined to pay premium prices for farmland.
   
• Emotional attachment: For many, a farm is not just a piece of land; it represents memories, heritage, and generations of family history. This deep-rooted connection can transcend the farm's objective market value. Buyers with personal or ancestral connections to the land might be willing to pay a premium, driven by the desire to reclaim or preserve a piece of their history.
   
• Ego: Farmers and investors can possess a sense of pride and ego tied to land ownership. This sense of pride can influence how they perceive and value farmland. Land ownership has long carried a certain level of prestige and respect. In some cases, buyers with a big ego may be willing to pay a premium for farmland.

These are a few factors that can have a significant impact on land values. Farm professionals who are good at their craft know how to navigate and capitalize on these drivers of value to the benefit of their clients.

Photo Credit: istock-alenamozhjer