In the richest and most expensive farm property across southern Minnesota, the land market is changing.

Several years of double-digit price increases have come to an end — and it may stay that way, experts say.

Sales data from 2014 show that while the median price of farms statewide increased by 5.1 percent, it's a different story in specific areas. Ag land prices in southwest Minnesota dropped by 8 percent last year compared with 2013 and were virtually unchanged in south central and southeastern counties.

"We're not seeing any upward tick in [farmland] prices, that's for sure," said Michael Bahl, southern Minnesota ag manager at Wells Fargo Bank in Owatonna.

The change is important because surging land prices reflected an agricultural boom in rural Minnesota. Many have expected an eventual slowdown that would put the brakes on spending.

The main reason for the change is crop prices, Bahl said. "If the price of corn drops, the price of farmland drops, too."

Central and west-central Minnesota reported increases in median land prices of 10 percent and nearly 7 percent, respectively. But even those markets are changing.

All of the latest data come from information collected by the Minnesota Department of Revenue from ag land sales between Oct. 1, 2013, and Sept. 30, 2014.

University of Minnesota ag economist Steven Taff each year takes the Revenue Department's raw data and updates a huge database of farmland sales in the state since 1989. Taff steadfastly declines to interpret the data or predict what's next.

"Is this reduction in some parts of Minnesota a portent of future downturn throughout the state?" Taff said. "I don't know."

Real estate experts aren't surprised at the lower land prices.

"We're definitely having a setback here right now," said Darrell Hylen, a farmer and agent for Wingert Realty and Land Services Inc. in Mankato, which sells 60 to 75 farms a year, mostly at auction.

"As we rolled into the second half of 2013, that's when we started to see a 10 percent to 15 percent drop in land values," he said.

The changes paralleled a steep slide in corn prices from about $7 per bushel to $3.50, Hylen said. Selling corn for little or no profit means farmers have less money to bid up land they want to buy or to pay high rental prices for fields, he said.

High quality land that sold for $10,500 an acre a year ago, Hylen said, now fetches between $8,000 and $9,000 per acre. "Sellers are a little bit concerned because we're 15 percent off the top [of land prices], but I always like to remind them that we're double where we were four years ago," Hylen said.

He expects the prices to level off and not to decline too much further. High quality farmland is still in demand, Hylen said, and individual farms only come up for sale about once every 50 years, on average.

Deciding to sell

Even in areas such as central Minnesota, where the median price of land increased in the first three quarters of 2014, real estate agents are noticing a change in the past few months. Land prices for many properties are down 5 percent to 10 percent, said Glen Fladeboe, co-owner of a farm auction business with offices in Willmar and Minneapolis.

However, the decline is not across-the-board. Prices for the highest quality farmland have stopped rising but remain strong, he said, with steeper drop-offs for lower production land.

Fladeboe Auctions sells about 20 properties a year, mostly for baby boomers on the eve of retirement who inherited the farmland and have been renting it to producers.

"Most of them are concerned that because of the current commodity prices, their total value of the land will be less two or three years from now than it is today, so it's better to sell sooner than later," Fladeboe said. "We concur with that."

But Fladeboe said that's not the same advice he'd give to someone expecting to own land well into the future, as its value will appreciate over the long term.

Pat Jacobs thought about that last November, when she and her six siblings sold their family's 195-acre farm in Kandiyohi County in central Minnesota. It was the first time the land had been on the market since her parents bought it for $40 an acre in 1940.

Jacobs said the main motivation for selling was to settle the family estate after her 95-year-old mother died last summer. Two farmers who had been renting the land for years bought the two parcels at auction, for $8,400 and $9,400 per acre, Jacobs said.

"For a while, land in that area was bringing even more than that, but we were very pleased with the amount we received," she said.

Choppy market

On a broader scale, Jeff Swanhorst, chief credit officer for AgriBank in St. Paul, said the market is in flux across parts of the Midwest, not just in Minnesota. For the past few years, land prices have generally increased every year in most areas of the 15 states that the bank serves, he said, but that's over.

"This is clearly a change in that trend of land values where it's now choppy — some are up, some are down," he said.

The wholesale bank provides funding to retail farm credit associations, which in turn loan it to farmers. AgriBank analyzes land price information from the U.S. Department of Agriculture as well as appraisals of 300 benchmark farms in its system and other sources, Swanhorst said, and keeps an eye on various forecasts of future crop prices.

"Under all the price environments that we see forecasted for commodities right now, which drives net farm income, we expect there to be some further softening or reduction in land values over the next three to five years," Swanhorst said.

He said prices may slide, but they won't collapse as they did during the 1980s farm crisis.

Interest rates are far lower now, lenders are more conservative and many crop farmers have had several years of good yields, prices and profits, he said.

"Most farmers are going into this environment with good strong financial positions as well as good liquidity or working capital positions," Swanhorst said, which gives them some time to adjust if crop prices remain low.

Farm real estate agent Hylen agrees with that, and said the ag land market has stabilized, not tanked.

"We still have more pent-up demand to buy more land than there is land available," he said, and neighboring farmers are often first in line when land comes up for auction. "They're motivated to buy," he said, "because they won't live long enough to get a second chance."

Tom Meersman • 612-673-7388