The pace of farmland price appreciation across the Mid-South and Southeast U.S. moderated in the first quarter, according to the latest Farmland Market Survey released by Farmland Investor Letter.
Non-irrigated cropland values rose at an average 7% year-over-year pace across the eight-state region, down from 9.3% in last's year's fourth quarter. Irrigated tracts increased at an 8.2% annual pace, versus 9.6% in the previous quarter. Pasture values were up 2.5% from a year ago, compared to a 3.2% 12-month rate at last year's close.
The survey, conducted from March 15, 2013 through April 29, 2013 was based on the responses of 107 appraisers, property managers, lenders, real estate brokers and landowners located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri and Tennessee. Farmers and investors expect cropland values to remain stable through the second quarter, despite flattening crop commodity prices. Historic low interest rates continue to support land values. However, continued robust gains in the stock market may compete for the attention of investors.
Survey participants estimated that non-irrigated cropland across the region was worth an average $3,111 per acre in the first quarter of 2013. Irrigated cropland values averaged $4,169 per acre. Pasture values averaged $2,264 per acre. On an individual state basis, non-irrigated cropland values ranged from $3,993 per acre in Florida to $2,571 per acre in Georgia. Irrigated cropland values ranged from $5,013 per acre in Florida to $3,273 per acre in Alabama. Pasture values ranged from $3,125 per acre in Florida to $1,739 per acre in Arkansas.
Cash rent increases continue to lag land price inflation across the region. Rents on non-irrigated cropland averaged $112 per acre, ranging from an average $69 per acre in Alabama to $125 per acre in Mississippi. Irrigated cash rents averaged $200 per acre across the region, and ranged from an average $121 per acre in Alabama to $318 per acre in Florida. Pasture rents averaged $34 per acre, ranging from $25 per acre in Mississippi to $38 per acre in Georgia. Rent income yields, which are calculated by dividing gross cash rent by land value, offers insights into the relative pricing of land tracts regionally. Across the Mid-South/Southeast, non-irrigated tracts are estimated to be generating a 3.6% rent income yield; irrigated tracts 4.8% and pasture 1.5%.
With farm crop prices moderating, survey panelists turned cautious in their outlook for both cropland and pasture values, forecasting that prices would remain stable though the second quarter. Respondents are most optimistic for irrigated cropland tracts, where 48% expect prices to increase, while 52% look for no change. Investor demand for irrigated tracts appears strongest in Louisiana and Arkansas where 78% and 74%, respectively, of respondents look for irrigated land values to continue rising. Interest in non-irrigated tracts is also strong in Louisiana, where 63% of respondents forecast higher prices.