Farmland values have steadily risen for years. While there’s no indication of a decline, Farmers National Company is observing signs of settling. The company released its latest land values report in early July.
“Moving into the second half of 2023 and the first half of 2024, we’ve experienced significant increases in interest rates, declining grain markets and inflation,” said Paul Schadegg, Farmers National Company senior vice president of real estate operations. “Despite these negative pressures, the land market has remained relatively resilient but shows signs of settling in general, including single-digit decreases in specific areas.”
According to USDA data, the average farm real estate value in the U.S. climbed from $2,090 per acre in 2009 to $3,970 per acre in 2023. California remains the state with the highest average price per acre in the West, at $13,100 per acre.
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Farmers National Company said there has been tremendous growth in the agricultural land market over the past five years, with gains in value across all classes of land in every region of the country. This is due partly to strong commodity markets, moderate interest rates, buyer demand and an overall healthy agricultural economy.
“A significant factor in maintaining the level of land values has been investor interest in the market,” Schadegg said. “While these bidders are not always successful buyers of land, they are certainly involved in setting the floor on values as they bid up to the levels of their investment criteria.”
As buyers consider investments throughout the remainder of the year, additional expenses for interest and lower commodity markets will be at the top of their mind, Schadegg said. Land values will adjust accordingly. Areas with alternative land use projects or irrigation water concerns could experience more dramatic increases or decreases in values, he said.
Outside investors and ag producers each have an appetite for land investments, with the investor looking for land to produce annual returns and producers looking for expansion opportunities.
“Emotion comes into play when the ag producer is motivated by adjoining land, operation expansion, or land that has potentially never been offered for sale in the area,” Schadegg noted.
Farm operators remain the largest segment of land buyers, so the biggest impact on land values will continue to be profitability in agriculture. “If profit opportunities are limited, motivation to buy will decrease and, subsequently, pressure land values into a downward trend,” Schadegg said.
Listing volume and closed transactions for the company match the pace of 2023, with activity and interest building in the fall, he continued.
“This is an exciting time for agriculture landowners across the U.S. Your land asset has never been more valuable than it is today,” Schadegg finished. “The strong demand for ag land and its historical appreciation in value will continue to support the current values as we progress into the second half of 2024.”
Regional insights
In the Southern region of Texas, Oklahoma and Arkansas, there are multiple geographic areas with different types of land use and values. Demand in Texas and Oklahoma is a little softer than a year earlier, said Bill Shannon, senior farm manager for the southern region. There is also a slight decline in value for all land classes, including pasture, dryland cultivation and irrigated cultivation. Ranch prices in north-central Texas and around the Dallas-Ft. Worth metroplex have stabilized.
“Improved and native pastureland with greater than 200 acres with influence from the metro area have values that range from $6,000 to $12,000 per acre,” Shannon said. “Larger ranch properties in the Cross Timbers Region west of Fort Worth of greater than 2,000 acres have a value range from $1,200 to $3,000 per acre.”
The south-central region of Kansas, eastern Colorado and western Missouri has seen high-quality land values stay steady over the past year. The region has begun to show a little price weakness in average to below-average quality land values.
“Drought, heat, lower inventories of land for sale and volatile commodities are still all at play across the region,” said Steve Morgan, area sales manager for the south-central region.
The western region consists of western Nebraska, northwest Kansas and northeastern Colorado. Central and west Nebraska and northeast Colorado have struggled to maintain the record highs of recent years, said Cole Nickerson, area sales manager for the western region.
“One would expect a sharp increase in rangeland prices with the strong cattle markets, but that has not been the case,” Nickerson said. “Low cattle inventories across the country have tempered demand.”
