In rural Minnesota, 'nothing but upside' as farmland values near record highs

Rising prices for farmland across Minnesota helped Greg Schuman and his siblings decide it was finally time to sell off 160 acres in Chippewa County that his family owned for nearly a century.

"The timing was right for us, with land prices where they're at, and where we're at in our lives," said Schuman, who lives in Nisswa and turns 60 this month. The four siblings sold the farm between Clara City and Maynard to an investor for an amount Schuman wouldn't reveal except to say that "all of us were very happy with the outcome."

Near-record high corn and soybean prices over the last year are the biggest driver in a farmland value surge that, if it continues, could emerge as rural Minnesota's version of the Twin Cities real estate boom.

"Right now everything is flashing green for farmland sales," said Michael Swanson, chief agricultural economist for Wells Fargo. Low interest rates coupled with land values that started to tick upward last year, after more than five years of slumping or staying flat, are creating a seller's market for farmland owners.

Swanson said he thinks farmland values are likely to stay high the next few years given forecasters are expecting the same for commodity prices.

That's "nothing but upside" for rural Minnesota, he said. For consumers, farmland prices are among many factors contributing to rising food costs, but Swanson said that effect is spread widely. The downside is felt by new farmers and those trying to get into the business.

"It's totally analogous to the housing market," said Matthew Fitzgerald, a 29-year-old organic grain farmer who works about 2,500 acres in the Hutchinson area, almost all of it rented. "If you're a beginning farmer who doesn't know people and you don't have a ton of cash, you might not be perceived as a reliable buyer."

Fitzgerald, who's active in the Central Minnesota chapter of the National Young Farmers Coalition, followed his parents into organic farming, which they took on as a new career later in life. He said he'd love to own more land someday.

"I'll keep playing the lottery," Fitzgerald said.

The last big spike in farmland values in this part of the country was in 2013 and 2014, which came after two years of high crop prices and farm income. Land fetched prices exceeding $9,000 per tillable acre at that time, said Glen Fladeboe, who co-owns Fladeboe Land, a farmland real estate company with offices in Minneapolis and Willmar.

It later fell back to between $6,000 to $7,000 per acre, he said, and stayed in that range until last year. That's when another spike in commodities, along with large infusions of federal aid to farmers, left many of them more flush with cash than they'd been in years.

"This is the strongest land market that we've seen in a decade, today," Fladeboe said. In recent weeks he's seen per-acre prices push back to $9,000, he said. Farmland most often comes up for sale in September and October, creating a seasonal demand effect akin to the peaks in residential real estate that happen in summer.

Dave Bau, who teaches agriculture business management at the University of Minnesota's Extension office in Worthington, said he thinks another reason some farmland sellers are particularly motivated right now is that they suspect the Biden administration and congressional allies will move to raise taxes on land sales.

"The Democrats are in power, and if taxes are going up next year then maybe this year is a good time to sell your land," Bau said.

Farmland sellers like Fladeboe and Chuck Wingert, who's based in Mankato, said the majority of buyers are existing farmers, often with a family link to the sellers, or who own adjacent farmland.

But both have seen rising investor interest in farmland. Wingert said his sales have typically been about 65% farmers and 35% investors, but said there's been a recent jump in the latter category.

"It's investors who want to get their money out of the stock market because they see inflation coming," Wingert said, adding that farmland has long been viewed as a stable, low-risk investment.

Last January, the Land Report, a magazine about real estate, identified Microsoft founder Bill Gates and his estranged wife, Melinda Gates, as the largest private owners of farmland in the United States. Their holdings include farmland in Wisconsin and Iowa but not Minnesota. The magazine's analysis found the second-largest farmland holdings nationwide belong to the Offutt family, who own the Fargo-headquartered potato growers R.D. Offutt Company.

Schuman and his siblings sold their Chippewa County farmland to a private investor through Fladeboe Land. Schuman said he had few details on the investor. His grandparents bought the land, he thinks, sometime in the 1930s. For decades they grew corn, soybeans, wheat, sugar beets and at times other crops.

"My brother and I worked it for a time in our 20s before we ventured out to do other things," said Schuman, who works for a solar energy firm in St. Paul. For the last 25 years he and his siblings rented the land to a farmer in the area, but he's also close to retirement and wasn't in the market to buy it.

"I would have loved to see a young farmer get that farm," Schuman said. "But through this process, odds are someone there locally will get a chance to rent it and get their opportunity to farm."