Spokane, Wash. – Steady demand and a very limited supply of agricultural lands led to increasing land values for 2013. Market observers in all four Northwest states – Idaho, Montana, Oregon, and Washington continue to report a shortage of good quality agricultural properties on the market, according to a Northwest Farm Credit Services land value survey.
Limited sales were primarily made to established agricultural operators or investors before listings ever hit the open market. Competition for available properties likely overshadowed increasing concerns over interest rate increases, declining commodity prices and water shortages.
Demand and market activity are reportedly mixed throughout the region, and are generally dependent upon property type and/or market segment. Preliminary year-end numbers for average dollar-per-acre land values show an upward trend, approximately 13 percent from 2012 to 2013. The 2013 numbers are based on lower than average sales numbers, but the overall trend is thought to be accurate. Irrigated cropland showed the largest increase in values. Comparatively, dry cropland and pasture showed limited increases during that time.
Going forward, declining grain prices may temper demand throughout the region, but any impacts have yet to be seen in the Northwest’s core agricultural areas. Recent issues impacting production and profitability in the sugar beet industry may also have some implications for land values in portions of the region.
Regionally, drought conditions remain a concern in areas of the Northwest. The dry weather has deteriorated pasture quality, which is pressuring the cost and availability of range land. Irrigation water supply was sparse throughout the late summer in areas of Idaho and Oregon, and isolated areas of Montana. Reservoir storage in many areas was nearly or completely exhausted at the end of the irrigation season. Many areas have experienced below average precipitation and snow-pack which may result in below normal reservoir levels going into the next irrigation season. Irrigation water shortages in these areas could challenge crop yields.
Anecdotal reports suggest that potential buyers are becoming increasingly cautious about the direction of land values. Declining commodity prices, water concerns and rising interest rates are issue that may impact demand and temper land values going forward.