Prices for farmland have risen in recent years, but the market is 'cooling down'

Farmland values are expected to plateau.
(Photo by Micheile Henderson, Unsplash)

Farmland prices are predicted to flatten in the future after a period of strong growth. "Headlines boasting record-breaking farmland sales and surging values gave voice to the excitement in the market last year while land prices climbed. As 2023 marches on, the experts say some of that excitement may be waning and to expect strong, but flatter prices going forward," reports Cassidy Walter of Successful Farming. Tim Koch, executive vice president of business development for Farm Credit Services of America told her: "We'll probably see some high reports of really high-quality farms that are well-located…and we might see some lower-quality farms start to back up a little bit in prices as we head toward the end of the year. But as a whole, I would anticipate that we'll see a flattening of prices throughout the remainder of the year."

Data available seems to agree with Koch's outlook. Farmers National Co.’s latest Regional Land Values Report looked at farmland sales data for high-quality farmland across 18 states. "All saw the average sale price per acre increase between June 2021 and June 2022 and from June 2022 to June 2023. However, the rate of growth between 2021 and 2022 was higher for most states than in the past year," Walter explains. Increases varied by state, with Iowa farmland gaining roughly $3,000 per acre during June 2022 to June 2023, as compared to Arkansas, which gleaned only $300 more per acre during the same time period.

Overall, experts predict a competitive, solid market for high-quality land sales. "David Whitaker, president of Realtors Land Institute, says when looking at the numbers from the past several surveys, a good way to describe the most recent one is 'steady.' He also expects steadiness over the next six months," Walters reports. He told Walters: “I think there’s enough money out there that we will hold steady. I think farmland is the asset that everybody wants and wants to keep and is willing to pay for.”

Walters adds, "While there appears to be agreement that the market is staying strong but cooling down, there is a non-negotiable caveat that several variables could send land values in an unexpected direction. . . . Experts say there is a strong connection between commodity prices and farm revenue and farmland values. Higher prices equate to farmers having more cash on hand and more interest in investing in their operations. With lower prices, expect the inverse. . . . Steve Bruere, president of Peoples Co., says rising inflation will drive land values up and it is too soon to tell if this current period of high inflation is truly over."