The average value of an acre of Wisconsin farmland slid 3.1% to $4,249 per acre in 2019 versus a year earlier, according to an annual analysis conducted by the University of Wisconsin Extension Service. “We must keep in mind that land values had grown significantly in 2018, so 2019 might be seen as a bit of a correction to that upswing,” states the report author Simon Jette-Nantel. This softening of land values occurred in spite of improving commodity prices and farm income in 2019. In addition, there are marked differences across the state with some regions faring better than others, he notes.
“Over the last five years land values remained strong despite the difficult economic conditions and substantial losses in the number of dairy farms over the last few years. During that period the vast majority of landowners, even those forced to exit dairy, were not necessarily forced to sell their land. Most could continue cropping or rent the land, thus limiting the supply of land on the market and help supporting market values,” he observes.
“Between 2014 and 2019, the average annual growth in Wisconsin agricultural land value was 1.8%. Adding those capital gains to a rental income of about 3.25% would give landowners an average annual return on investment of 5.05%. Given that farmland is a low-risk investment, this return compares advantageously to other investments such as low-risk corporate bonds which averaged 3.75% over that period,” he notes. “Nevertheless, 2019 has shown signs of weakening demand and things may not improve in 2020 given the high level of uncertainty surrounding commodity price projections. The lower interest rates and various financial help packages offered by the government provide some hope for land values to remain steady in 2020. As of June 1, 2020, the data for the first quarter of 2020 indicated stable land prices and did not show any negative impact from the COVID-19 crisis,” he states.
“Obviously, there were wide variations in the sale price per acre,” he states. About 25% of the sales were less than $2,600 per acre and only 18% of sales had prices above $6,000 per acre. High-priced sales make good headlines; however, there were very few sales above $10,000 an acre, accounting for only about 3% of all transactions. In 2019, land values depreciated in most of the nine agricultural districts. Five of them saw decreases in value between 3% and 5% (Central, South Central, North Central, East Central and Northeast) while slight increases in value occurred in the West Central and Northwest districts. More significant depreciation in land values is reported for two districts (Southeast and Southwest).
The study utilizes the transfer return tax data collected by the Wisconsin Department of Revenue. A transfer return tax is collected when a property is sold and a transfer return form is collected with the tax payment. The overview is based upon sales of bare land between non-related parties in Wisconsin townships. All parcels were between 30 acres and 500 acres and their predominant use was agriculture at the time of the sale. Properties with water frontage or managed forest acreage were filtered out. Parcels sold with retained property rights or with miscellaneous use notes referring to mining were excluded.