Cropland Values Soar by 15% in the Midwest and Plains

High commodity prices and low interest rates fueled a sharp 15% increase in the value of cropland in the Midwest and Plains in the third quarter, according to surveys of ag bankers by four regional Federal Reserve banks (Chicago, Kansas City, Minneapolis and Dallas). “Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong,” said a summary of the surveys.

The value of non-irrigated cropland increased by an average of about 15% across all participating districts, according to the report. It was the highest gain since 2013. The largest increases were in Iowa, up 28%; Minnesota, up 26%; and South Dakota, up 23%, compared with values in the third quarter 2020.  The surge in farm real estate values was consistent across nearly all states.

Despite concern about rising costs of inputs, such as seed and fertilizer, ag bankers expected farm income and credit conditions to remain strong through the end of this year.  Providing support to agricultural real estate markets, interest rates on farm loans remained historically low.  The surge in land values bolstered farm balance sheets. Land accounts for 80% of farm assets.  

EDITOR’S TAKE:

Like it is stated in the article, land comprises 80% of all farm assets. Do the math, an average size crop farm with 2000 acres valued at a conservative $5,000 per acre a year ago was worth $10,000,000. A year later and it’s now worth an additional $1,500,000. This is precisely why we keep suggesting to “Look Beyond Your Lot.” A farmer’s balance sheet is looking stronger by the day AND they have cash/income. Farmers and ranchers are a solid bet as customer prospects. As the general economy continues to struggle with inflation and starts to pull back some of the exuberant spending, especially those with low or middle incomes, the financial positions of farmers/ranchers look better all the time. As a CAD member you are in a perfect position to take full advantage of this knowledge!