AgriTalkPaul Schadegg is the Senior Vice President of Real Estate Operations at Farmers National Company and he joins us to discuss ag real estate demand, impact of interest rates on farmland market, and outlook for second half of the year.
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Welcome back to Agri Talk. I'm Chip glad that you are with us this morning. Ok. Land values Davis. Is there anything more
interesting to farmers to talk about than land values? You got the equipment values. You've got markets, you've got weather. I get that. But boy, when there's an auction in the neighborhood, everybody wants to know what the selling price was,
right? That's a, there is nothing more interesting or important for farmers to pay attention to than land values
shameless. You are shameless.
It's true though.
Yes. Yes. This is the, the, well I put on the hat, you know, before we signed on. But yes, absolutely. And you know, especially when it comes to the, these little microcosms of auctions around. I've got a few questions for Paul too about these, these auctions and whatnot. Let's bring him in
Paul. She is the senior V P of real estate operations at Farmers National Paul. It's good to talk with you again. How are you?
Hey, I'm doing great, uh great lead in guys. You know that. Let's there is nothing more exciting than talking about land values for sure. That's exactly right. Ok. The last time that you and I talked, Paul we recapped, what was a strong 2022 land market? Let's talk about how the market is doing through the first one, third of 2023. Yeah, I was looking at the farmers' National Twitter feed and
looking at some of the auctions that are coming up and it seems like there's a decent amount of ground that is up for auction. Is that, is that the right read?
Yeah, I think so. Um, the when we start, you know, this is definitely a slower time of year for um land auction or land sales in general. But with the uh over the, the past, you know, 10 15 years, we the buyer uh
demographics have definitely changed. And so now what we're seeing is more nontypical buyers, they're not afraid to buy land in the spring or summer during a growing season where typically with that just didn't happen. So we, when we're looking at our pipeline uh from today until, you know, September, when things really start cranking up,
I can tell you that pipeline is starting to fill up. We're really excited about that and then the fact that we are scheduling auctions that are happening now. And um, and then also some uh listings and uh some higher profile uh listings that are gonna come to the market probably here very soon.
Ok. More nontypical buyers. Are you talking about investors?
Yeah, you, yeah, they, you know, they've been part of that equation for, you know, the past many years. But, um, and that's what's kind of shifted our, our time frame of, of marketing. We used to say we sell land from October to March and the rest of the year, you know, there's not much that happens but,
but those guys are not afraid to go in and negotiate um, payback of inputs or take a lease halfway through a year or something like that. And that's, that's where it keeps driving that market. That doesn't necessarily mean that a farmer isn't gonna bid on that land because if it comes up for sale and it's in his wheelhouse, you know, they're definitely gonna be there. So, yeah. Are farmers still the number one buyers?
Yep. Uh you know, just had a conversation with a banker last week about where we see that changing. And right now we're not seeing much change when we look at it with throughout our company. The they're still the largest group. It's about 80% of the total land sales that we transact are still those farmer operators um that are the buyers
we still have in, you know, the other, not what we call nontypical buyers down in the, the investment groups and things like that, that they're, they're still um bidding on land, but they're just not always the successful buyer. Ok. The Jan Feb March quarter, uh, was it an active quarter for, uh, Farmers National?
Yeah. So when we look at, it's hard to compare 2021 2022 because those were absolutely record-breaking years for us. But when I start looking at the five year averages, we're still um above pace of the five year average.
Uh, you know, typically we see things slow down as we get into uh April May for sure. Um When I look at our April numbers, we were above our five year pace um on both sales volume and sales value.
So uh still still encouraging numbers there and that what that's gonna help do is help sustain these, these values that we've pushed up. We're not seeing that value increase like we were a year ago, but we are, we are definitely still seeing some uh good stable values and for high quality land, we're still seeing, you know, some great competition which sometimes drives that above market value.
Yeah, Davis, that, that fits your outlook, doesn't it? Well, it
really does. And Paul I've, I've got a question about urban sprawl and the the premium that development potential can add to some pieces of property when farmers go.
I mean like I I know in, in my local area. Oh yeah, this place is ripe for development. Do farmers see that and think? Oh, shoot that's gonna go out of reach in a big hurry or are they still willing to kind of jump in there and try, try to uh try to capture that land.
Yeah, any time you're within a metro area and uh and there's potential for development, I think that agriculture producers tend to step back and think, well, you know, I I might go ahead and go to the sale, but I'm probably not gonna push it as high as some of these guys
and in visiting with some developers, you know, a lot of those guys are looking at long term gain in value, not short term. If you're within a certain perimeter of a metro area, it could, it could be felt very quickly because there's definitely a good demand for people wanting to get out away from the concentrated areas of the city. But
um but there's many of them. Uh we had a conversation with a guy here not too long ago that said, you know, my idea is I'm gonna buy this, I'm probably gonna hold it for 15 years before it really be comes develop the potential, but they are willing to pay a good price for it. And I think I have more farm operators that said, you know, instead of buying something like that, I may sell something like that and go buy something farther out. Yeah, yeah. When you see that happen at an auction,
I if you were interested in that piece of ground and it fits in with your operation. You want to go talk to that developer and be the tenant for the next 15 years.
Yeah, that's exactly what happens. And sometimes those are fun to watch because you have a guy that will bid up to, you know, X amount that may be a farm operator. And then the next thing you know is he's introducing himself to the guy that has the high bid. Yeah. Yeah, exactly. Exactly. What else, Davis?
Well, I'm curious also, um,
I gotta go to the pandemic thing because there was a lot of talk about the new normal and we're changing the way that things are done and we saw a real shift over to online, um, auctions in the land market and I'm wondering what vestiges of the, the pandemic new normal are gonna stick with us. And are there maybe some that are surprising you that are like, huh? Well, I thought that was gonna stick with us but it's not,
yeah, there's, um, there's not many things that, um, are not sticking and I was the first one, uh, you know, when we, when the pandemic hit and we started to have parking lot auctions and we were, we had to scramble to get, you know, an, an online platform set up
and, uh today's world is that's expected and it has nothing to do with the pandemic anymore. It has to do with convenience so a guy can be out planting corn and, and buy a farm, uh, on his phone. And, um, and, and some people, they like the anonymity that they don't want to stand, sit in a room and face their neighbors to bid on a piece of property.
And then the other side of it is just, um, you know, people like yourselves that want to kind of follow, where is this land market going? What's really happening and they want to experience, um, what, what's driving that market and how much excitement there is in bidding. And so we have a lot of people that, you know, just, um, that'll view those simulcast auctions and we still believe that there's a place for those live auctions. We, you know, we employ a lot of really great a
engineers and they do a great job and there are people that want to be in the room and physically bid and the nice thing is, is the, the pandemic forced our hand and we, we had to, you know, develop that and now it's, it's just expected and, and that's fine. We've, we've figured out how to navigate through it and, and it's, it's worked out well. Hey, Paul, uh, the headwinds for the land market, we've got about a minute left, uh, higher interest rates. Number one on the list.
Yeah. Um, you know, the, uh, our Clayton Becker, our president and I were having a conversation, uh, yesterday about, you know, where are we at? On things and he put it very well, he, he calls it profit or pressure and uh you know, there's still some great um momentum in the ag economy. And uh
then we look at what's, what are the pressures and interest rates are definitely gonna play a part in it. We're starting to see a little bit of that. Uh We're starting to see less cash being used a little more um lending uh happening across the country. So, um,
any, and, and I, I've said this before when we've talked any hiccup in the commodity markets is gonna have a pretty um direct effect on land value. So, so that, you know, we had a little bit of a scare here recently when we saw markets come down and, and I think as long as we can maintain some of those levels, you know, this, this still looks like a, a good opportunity.
Outstanding, good stuff, Paul. Thank you so much.
Yep. Thank you guys any time. All right. That is Paul. He is the senior V P real estate operations at Farmers National. All right, we've got
Sherman and Ryan standing by. It's time for this week's farmer Forum right here on a
