Farmland auction points to fears bubble will burst

Friday, March 14, 2014

KOKOMO, Ind. (AP) — All eyes in the room were on Mike Spangler when he shook his head "no."

 

At $1.55 million, he was out.

 

And with that, Brad Winger was the new owner of 156 acres in Liberty Township.

 

At nearly $10,000 an acre, the winner of Tuesday's farm auction wasn't sure he won and the loser wasn't sure he lost.

 

"How would you feel if you just dropped a million and a half dollars? My heart about fell out of my chest," Brad Winger said of the moment the Spanglers dropped out of the bidding.

 

"You don't want to give too much because five years from now, the land could be worth what it is now," Spangler told the Kokomo Tribune (http://bit.ly/1gpXL1P ), trying to be philosophical about the bidding war. "When ground gets this high, you can't buy every farm that comes up for sale."

 

Around 80 people packed the room at the Kokomo Shrine Club Tuesday, some there to bid, others there, as Halderman Real Estate Services area representative John Miner said, "to get free appraisals on their land."

 

With crop acreage near a record high, and corn prices expected to fall this year, there was some hope that Tuesday's auction would answer a few questions.

 

Would the sale price point toward a softening of land prices, or the opposite? Would the sale attract multiple investors from out of the community, or would the bidding take place between locals?

 

It was a microeconomic version of a macroeconomic trend, one which has both elated and concerned farmers.

 

Citing USDA figures, Bloomberg reported farmland values nationwide have increased by 72 percent over the last three years, leaving farmers concerned about a bubble market.

 

This year, the USDA is predicting the amount of money farmers will receive from crop sales will decrease about 12 percent. Farmland could lose 30 percent of its value in the next three years as the corn rush ends, Gary Ash, chief executive officer for 1st Farm Credit Services in Normal, Ill., told Bloomberg recently.

 

Even so, Miner said farms with good soil haven't seen any decline.

 

"In fact, we're not seeing much of a decline in anything," Miner said.

 

The wild card of the evening, Chicago investor Fletcher Durbin, was the guy in the room no one knew, apart from the auctioneers.

 

Friendly and relaxed, wearing a fishing vest and blue jeans, Durbin dropped out when the price reached $1.35 million.

 

"The investor might be the guy who runs (the bids) up, but the farmer is usually the one who ends up with it," Miner predicted prior to the start of bidding.

 

For the first 20 minutes of the auction, it was the out-of-state investor making waves

 

"What do you do with cash?" asked Durbin, who owns a house in Peru. "The nice thing about farm land is that the return is real. You buy a financial asset, you might get cash, but who knows what you've got? You might have something good, or you might be buying Enron. But the land is the land."

 

When it became apparent the sale would probably net close to $10,000 an acre, Durbin quit bidding.

 

From that point on, it was the Spanglers versus the Wingers.

 

To say the families know each other is an understatement. The patriarchs of the families, Don Winger and Charles Spangler, were both present Tuesday, but their sons were doing the bidding.

 

The families both attend Kokomo Zion United Methodist Church and both families have land adjoining the auction property.

 

"The ones that bought it were the ones we figured would buy it," Spangler said.

 

The auction property, listed as the Ammerman-Harris property, had been in the same family for generations, but both the Spanglers and the Wingers thought it hadn't been farmed by anyone in that family since Don Winger and Charles Spangler, now both in their 80s, were young men.

 

The Wingers have been renting the land, which sits about three miles north of Greentown, for close to 30 years, Brad Winger said, so it made sense to try to buy it.