Increasing farmland prices can be hard on younger farmers

USDA photo via Successful Farming

As the average value of farmland keeps rising despite headwinds, it's harder for younger farmers to expand, reports Patrick Cooley of Successful Farming. "When Florida farmer Jeb Smith retires, he wants to leave his son Jared with some financial security, which means adding property to his 800-acre peanut, sod, cattle, and tilapia farm. Skyrocketing property values stand in his way." The father easked, "Can he afford to secure more? As a young 27-year-old, it's getting more difficult to compete." Cooley adds, "Jared shares his father's desire for more land, but as the suburbs of cities expand toward the family farm, his own dreams are pushed further out of reach."

Cooley explains: "Farmers across the nation face similar hardships after the average value of agricultural land rose to $5,050 per acre in 2022, a 14.3% increase compared to 2021, according to a USDA land survey. . . . . Florida, where ag land prices increased 10%, is hardly the most striking example. Prices rose 25% in Kansas, 21% in Iowa, 21% in Nebraska, 17% in Minnesota, and 19% in South Dakota."

The reasons for the increases vary, Cooley reports: "In Florida, developers pushed out farmers as suburbs grew and white-collar workers, newly empowered to work from home, looked for homes outside of congested cities, says Daniel Munch, an American Farm Bureau Federation economist." Kent Thiesse, senior vice president at MinnStar Bank in Minnesota said the main reason in the Midwest is "strong profit levels in (corn and soybean) production in the last two to three years."

Another reason: The amount of available land is decreasing. Muench told Cooley, "Populations are increasing, and folks are moving around. That pushes out agriculture." Cooley reports, "Some farmers like Smith pin the blame on wealthy, out-of-state developers gobbling up farmland for housing or solar arrays, but Thiesse says farmland buyers in the Midwest are overwhelmingly local. . . . Austin Charlson, an Iowa farmer who also sells property, sees wealthy investors at land auctions. 'But then there's also been two or three neighbors to that farm, and they're the ones pushing each other.'"

For established farmers, the cost of expansion is more doable. "Buying more land is a quick path to higher profit margins," Cooley writes. But for younger farmers, the cost of initial inputs like tractors and other equipment is also increasing. To help cover those costs, Charlson told Cooley, "You want to spread that cost over more acres, and that way, you can justify updating your machinery." Younger farmers may not have those options. Cooley reports, "Farmers who lease a portion of their fields are also feeling the pinch as land owners hike cash rents, Munch said. . . . Nearly 40% of U.S. farmland is rented or leased, according to the Department of Agriculture's Economic Research Service." Munch told Cooley, "That's a barrier to entry for a lot of folks."