High-Quality Farmland Is Still Inching Up in Price Across 18 States

The number one question farmers are asking Paul Schadegg today is whether land values have finally hit a plateau after their long, multi-year run of growth.

“That depends,” he says, “on the region where the farmer is located.” In general, he sees a slowdown in price increases across the country but no lower prices for high-quality farmland. 

“When we compare not just our company data but also data from the Federal Reserve surveys, we’re definitely seeing some settling, a de-escalation,” says Schadegg, Farmers National Company (FNC) Senior Vice President of Real Estate Operations. 

Along with that, he says there are fewer high-quality parcels of land coming to the marketplace.

Single-Digit Price Growth Now

In FNC’s mid-year land values report released recently, it says the land market entered the period of de-escalation starting in the fourth quarter of 2022. The pace slowed as a result of increases in interest rates, inflation and input prices.

Increases in land values are now in the single digits instead of double digits, as reflected in the chart FNC provided which shows June prices for this calendar year as well as 2021 and 2022 across 18 states.

“What we're seeing is when high-quality land is offered to the market, there's no shortage of demand for that land,” Schadegg says. 

Properties With Softer Prices

Schadegg sees lower quality land prices are a bit softer and potential buyers are fewer and slower to bid.

“Land that has drainage issues, erosion issues, maybe some fertility issues, things of that nature, those are the properties that are being discounted just a little bit. Farmers don't want to pay a high price for a piece of land that they then have to go spend money on to fix some problems,” he says.

Schadegg adds that he hasn’t seen any uptick in “no sales” unless a reserve was set too high by sellers with unreasonable expectations.

Looking Ahead Through Fall

Schadegg says FNC currently has 107 listings, with 30-some of those scheduled to go to auction between now and the first part of September. He also anticipates high-quality land will continue to see strong interest through the end of the year. He feels what drives that continued interest is the belief there is still opportunity in farmland.

“There's opportunity for people to purchase a valuable asset that has a track record of appreciation over a long period of time,” he says. “Then there's an opportunity for those individuals who have owned land for a long period of time to decide if now is the time to sell and capitalize on that investment or to hold onto it and let it continue to appreciate.”

“The ag economy across the U.S. is pretty stable, and with fewer properties being offered to the market it creates a unique supply demand scenario that definitely favors the landowner. And that'll help maintain both the current and long-term value of farmland.”

EDITOR’S TAKE:

So, what is the outtake on this report? Good quality land is still in high demand while lower quality land sales are softer. That said, farmers/ranchers still have plenty of money and when a quality piece of land comes up for auction, they are all over it. This report also reminds us that the land farmers/ranchers already own continues to escalate, albeit at a slightly slower pace. Nevertheless, their land is worth more, thus, boosting the balance sheets even more. Farmers and ranchers are solid financially and should be at the top of every CAD member’s prospect list. Develop those unique relationships through parts and service specials or emphasizing AgPack® where they can realize a return on their truck investment and have even more discretion with their operating funds. Make them a priority so they can make you a priority when it’s time to lease or purchase that new truck!