Here is a view from the ground in each of our different market regions, delivered by the individuals that are actually doing business there and who are often not impressed by statistics – or at least can give you the real story behind them as well as a sense of the mood of the market and where it is headed for the coming year.
Northern Rockies – Jim Taylor: Optimism is high in our marketplace and we are seeing a limited supply of operating ranches coming into the marketplace at higher asking prices due to high cattle prices and good prospects for them to remain high. Everyone is hanging on to their heifer calves as cattle numbers begin to build. Good farmland is also in high demand and there is very limited supply for sale. We anticipate upward pressure on anything productive. Retreat-type property is a bit of a mixed bag with a limited supply of buyers moving into a very crowded marketplace. Certain unique properties that really fit a buyer sold very well with many others selling at significant discounts and plenty of inventory is languishing – even after price reductions. If the national and international economy does not weaken, we anticipate more sales of recreational ranches in 2015. There is still a fair bit of inventory to move through the system before there will be much upward pressure on prices.
Northwest – Roger Dryden: The Northwest Region has some outstanding opportunities for clients looking at buying operating ranches. The Northwest still represents excellent value. Hay production has been exceptional with many ranches producing high quality forage that is marketed to the dairy and export markets, which are doing very well. Farmland availability is very limited as it is in other regions, but does become available from time to time. Our recreational properties have been on the market for a longer time than production ranches and prices have been reduced. We expect demand to remain limited in 2015. One facet of the recreational market that showed strength in 2014 included properties that exhibited proven hunting opportunities combined with some cattle production to offset the carrying costs. Blocked-up properties with live water and limited public access were particularly in demand. We expect 2015 to remain positive with prices holding and reasonable inventory in most categories.
Southern Rockies – Brian Smith: We witnessed a number of large scale “landmark” ranch transactions in southern Wyoming, Colorado and New Mexico in 2014. Over the last several years most of those had been in Montana so perhaps we were due. An interesting new trend was that recreationally oriented properties, which had been lagging, surged in activity. A dozen river properties in the $5 to $15 million category traded hands, some at surprising prices. Larger acreage hunting-oriented properties have been selling well for the last several years and they saw sustained activity. True working ranches remain in short supply and high demand, especially those priced without a premium for fancy improvements, views, elk or trout. Across the board, a common theme has been that buyers are recognizing that the highest quality properties are irreplaceable and those that are priced appropriately are seeing the bulk of the activity. On the other hand, properties with substantial challenges or that are perceived as significantly overpriced are not getting much attention. With the increased absorption, we seem to be inching closer to a balanced market.
The Great Plains – John Wildin: Interest in production agricultural land is still strong throughout the Midwest. The primary driver is still the near-zero interest rate environment, which has left the investor with few options for a decent rate of return on their cash. Over the last several years, producers have benefitted from good commodity prices, which have pushed up lease rates on ag land. The surge in domestic oil and gas production has minted many new buyers looking for a home for their new-found wealth.
While the grain commodity complex is lower overall from a year ago, cattle prices are near all-time highs. The drought continues and, in fact, has been expanded to again include all of Oklahoma and Kansas. The press coverage of the drought has shifted from Texas to the hardest-hit state of California. This will continue to inhibit the rebuilding phase of the record low U.S. cattle herd and should keep cattle prices and the demand for ranches high.
Southeast – Elliott Davenport: The Southeast includes several sectors of the rural real estate market, but a few trends hold true throughout the area. In general, activity in the marketplace is up. With this said, the level of increased activity varies widely among different markets and property types. Buyers have a very good handle on what they want and properties with unique attributes and lifestyles are garnering the lion’s share of their interest. For example, the most productive quail-hunting land in the core plantation belt of southern Georgia is in short supply with rather strong demand. Outside of the core belt, market activity is still rather soft, but moderately improving. Regardless of the property, buyers are price sensitive and are being thorough in researching market comps and holding close to these price points. There is still strong demand from multiple sectors for income-producing properties despite the drop in commodity prices that has tempered activity somewhat.
Texas – Tyler Jacobs: The Texas market is generally characterized as lacking supply of higher-quality properties regardless of the market segment. Irrigated farms were actively traded in the Panhandle region largely driven by dairy producers. In cotton raising areas, we are expecting to see downward pressure on land prices due to low cotton prices and lack of quality inventory. Working ranches are in demand due to high cattle prices. Much of the state remains understocked, so leased capacity is available depending on moisture. The Cross Plains, Rolling Plains, Central Plains, North and East Texas regions have seen modest trade with many sales built on the back of hunting, recreational and lifestyle opportunities. These properties remain in demand and will move if priced appropriately. The Hill Country sales have been dominated by premium properties with desirable improvements and/or water features. We anticipate that low oil prices might put a damper on demand for 2015, but there is no evidence of that so far.
California – Bill McDavid: California’s punishing drought affected ranchers and growers, forcing irrigators to switch from surface water to precious groundwater and many ranchers to liquidate breeding stock. Abundant December rains kicked off the winter season reinvigorating rangelands and filling stock ponds. However, ranchers are still relying on supplemental feed and much more rain is needed. These rains also benefitted dryland crops. The winter wheat crop is currently rated good to excellent. March rains are absolutely critical at this point.
Record cattle prices and low interest rates have caused operating ranches to be in high demand, but in very tight supply. Almond growers are competing for quality pasture land, which has driven up prices and further tightened supply. Recreation and lifestyle properties are on the market in abundance. Buyers, however, have not been very aggressive and continue to be sensitive to pricing and location.
Auctions – Scott Shuman: While there are fewer large land auctions taking place than at this time last year, there are more smaller farms going on the auction block than a year ago. It appears there are more equipment sales being scheduled for this spring than last, giving an indication that there could be more inventory of farmland hitting the market soon. With the decrease in commodity prices throughout the year we began to see more uncertainty in the cropland market. Nevertheless, prices remained strong throughout the country on quality farmland. Ranchland has remained in strong demand following the cattle market with many buyers looking for additional acres. While prices have been high, sellers have not been motivated to market many large acreage properties via auction. It is anticipated that several high-quality properties will be offered at auction this spring and early summer.