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Farmland Turnover drops by 50%

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November 21st, 2010

One of the recent issues of Cornhusker Economics put out by the University of Nebraska Department of Agricultural Economics showed how the farmland turnover for the current year is about half of the long-term trend.

The market for farmland has historically been a “thin” market in that very little is marketed and changes in ownership at any point in time are few and far between.

From an economics viewpoint, most people would predict that as prices rise, more and more product will be released into the market.  Farmland actually has the opposite happening right now.  As the price rises, farmers and investors are holding onto their farmland.

Since good farmland may remain in the same hands for decades, the window–of-opportunity is very limited to make a buy.

Over many decades, a rule-of-thumb has been anywhere from 3% to 5% annual turnover of ownership.  It is likely that the long-term trend is on the lower end, therefore, a particular piece of farmland will only be on the market once every 33 years.

The economics department reviewed all real estate transfer documents for Nebraska and eliminated any parcels less than 40 acres.  They then calculated a three year average for transactions in the 2006-2008 period.   These numbers were then divided by the total acres for each county to find out the turnover rate for each county in Nebraska.

They found that the average turnover for this period was 1.55% or an about 65 years between a particular piece of farmland coming up for sale.  Some counties were substantially under 1%.

Although this information relates to Nebraska only, I would surmise that most other states are seeing the same trends.

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

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