Joe Hickey, GreenStone VP and Chief Appraiser
Tracking sales data generated from land purchases across Michigan and northeast Wisconsin allows our property appraisers to accurately value land for lending and other business purposes. This is critical to both the lender and the customer.
To capture true land values, we tabulate benchmark data in nine regions, segmented by land use within the territory. This specific data illustrates trends in the marketplace indicating areas where values may be fluctuating more than expected.
The data collected in the GreenStone territory is pooled with other Farm Credit associations to build a national database. We closely monitor land sales, both public and private, to gauge trends in the land values.
Tracking this data annually keeps us aware of where values are headed and prevents any big surprises year after year. This information helps our customers evaluate their business options and provides us the necessary data for accurate and current appraisals.
Reflected in this year’s report is stabilization or slight decrease in cropland values. The Saginaw Valley area saw the largest decrease at 5.9 percent over 2018, with 80-acre parcels valued at an average of $480,000. Cropland in this area tends to be the most volatile due to the influence of sugar beet production, which we have seen range between $8,000 to $13,000 an acre more than the past several years.
The amount of ground that remained unplanted this season was one of the biggest drivers in this year's report. Between acres left idle and late planting, overall productivity and ultimately profitability are unknown when the data was collected in June.
The uneasiness of the crop year undoubtedly played into the buying activity and prices through the spring and summer. The variation in monthly transactions and regional differences is why we use annual averages to establish our market benchmarks in each area.
Cropland in southern and southwest Michigan, the northern Thumb and western Northeast Wisconsin (NEWI) all showed no change in value over 2018. The areas of the southern Thumb, the Saginaw Valley and southeast NEWI marked decreases of 2.5 percent, 5.9 percent and 3.8 percent, respectfully.
The appraisal of the Michigan dairy with 1,600 freestalls on a 40-acre site remained unchanged at $4,500,000 after three years of falling values, including a 5.5 percent decrease in 2018 over 2017. These values reflect an average of $2,650 per stall and $6,000 per acre on the large dairy. In NEWI, the small dairy (60 tie-stall on 40 acres) showed an increase of 3.1 percent after two years of no change. The small dairy values are $2,117 per stall and $4,775 per acre.
Land used for recreational purposes continues to show slight increases with land value in northern Michigan tracking at 2.8 percent above 2018. This increase follows a 12.5 percent increase in 2018. The June 2019 value for 80 acres is $148,000 ($1,850 per acre). The continual increase in recreational land values indicates a stronger overall economy and increasing interest in outdoor activities.
GreenStone monitors three areas in the transitional land category: southeast Michigan (Ann Arbor area); Lapeer County, Michigan; and Brown County, Wisconsin. Transitional land is defined as a property between uses with the current use likely to change.
The 40-acre tracts in southeast Michigan and central NEWI continued to show increases in value while the tract in the southern Thumb decreased 2.5 percent. Land values for transitional uses in southeast Michigan posted an average of $8,100 per acre compared to $10,500 per acre in central NEWI. The southern Thumb came in at $3,800. The large variance in value reflects the demand for non-farm land in each region.
The erratic cropping season, with challenging weather and growing conditions, will most likely affect land values in the coming months, as cash flow remains tight for many farmers. GreenStone will continue to monitor land values and other assets as we work to bring the fairest and equitable assessment for our customers. As our customers continue to focus on what they do best — grow and sell crops — we will work to help them maximize their assets while remaining profitable.
Joe Hickey is a VP and chief appraiser at GreenStone Farm Credit Services. If you have questions regarding the yearly appraisal benchmark survey, reach out to him at (517) 318-4100.