Farmland Values Normalize in Grain Belt States

January 30, 2019 06:00 AM
The pace of farmland-value drops has slowed in several areas but remain stable, according to a recent report from Farm Credit Services of America.

The pace of farmland-value drops has slowed in several areas but remain stable, according to a recent report from Farm Credit Services of America (FCSAmerica). Values largely held steady through the last half 2018 for the 64 benchmark farms FCSAmerica monitors in Iowa, Nebraska, South Dakota and Wyoming.

Iowa farmland values are largely unchanged from a year ago, while Nebraska and South Dakota each saw modest declines for the year. Only Wyoming experienced an uptick in benchmark farmland values. 

Farm Credit Services of America Benchmark Farms

“The softening of the market in the latter half of 2018 wasn’t unexpected and, in fact, it better aligns farmland values to profitability in the grain sector,” says Tim Koch, chief credit officer for FCSAmerica. “While producers in many areas of our territory benefitted from strong yields in 2018, the industry continues to be challenged by compressed margins. For producers who rent farmland, softening in the market will help their bottom line.”

Compared to the market’s peak, farmland values are down 19.5% in Nebraska, 18% in Iowa and 12% in South Dakota, according to FCSAmerica. 

Overall, farmland values are expected to trend back to normalization, says Jim Knuth, senior vice president Farm Credit Services of America. 

“The market has been able to digest this move back to normalization,” says Knuth, who spoke at last week’s Peoples Company Land Investment Expo in Des Moines, Iowa.

Profits, revenue, margins, current results and future expectations all drive farmland values, Knuth says. For example, net farm income has fallen 40% to 50% from its peak, while land values only declined 15% to 20%.

“We continue to see a tug-of-war or correlation disconnect between land valuations and the reality of the revenue stream currently being produced by land,” Knuth says.

Continued pressure on profit margins could lead to additional softening in 2019, according to the FCSAmerica report. However, the same factors that have helped to stabilize the market for the past three years remain in place, including interest rates near historic lows and strong demand for quality land that is in tighter supply.


Read more farmland price analysis:

3 Factors That Could Topple Farmland Values

2019 Farmland Outlook: Values Stay Resilient

Farmland Under Pressure

A Look at Land Values Across the U.S.

Rural Bankers See Bearish Picture for Farmland Prices

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Spell Check

bad axe, MI
1/31/2019 01:56 PM

  Bob you absolutely right , but people have to be willing to put $600,000.00 into a piece of farmland to hunt and play around, most leave it invested for 3 or 4% , they get $18,000.00 to $24,000.00 with no loss of principle, taxes, risk of not getting rent. In Michigan I am not seeing the non farmer buying all the land up at auctions and private sales. 90%+ is active farmers putting everything in a big balloon note at the bank . With $200,000.00 of credit market debt in this country for every man, women and child there is absolutely enough money floating around to buy it up, but it still has to cash flow. The problem the government in this country has is how are you going to keep agricultural going for the next generation . A 20 year old out of high school can't buy a 240 acre farm at todays values and make a living on it. Just remember depressions start when to few people in a country have and control all the money , if there's $200,000.00 worth of credit market debt per person in the USA that means everyone in this country should have that in a CD at the bank wright to balance it out. Wright? Dose a single mom down the road with 2 kids have $600,000.00 in CD's at the bank? She should have according to the credit market in this country but she don't. There is going to be a correction like 1929 ,so it resets and we start all over again. A currency in the world historically only last for 40 to 50 years than it resets to another currency. When that happens farmland in this country will be cheap so will everything else.

cooper, IA
1/31/2019 03:21 PM

  oh and cheap is a relative term. Right now farmland is much cheaper than housing. There is a housing shortage in much of the country developers are buying up farmland and putting up housing. Farmland will always be valuable as it has multiple uses not the least of which is that you can survive on it especially during economic strife as you describe. Homesteading off the grid is quite popular nowadays. Farmland will always have value.

bad axe, MI
1/31/2019 09:28 PM

  Bob never in a debate get anything personal, that's unproductive. CRP rental rate payments across the USA were lowered by the FSA office this year. All I am trying to say is we printed massive amounts of US dollars to keep the service sector going in this country and it's not serviceable . Remember what the government said when there share hits 24 trillion its over were about 2 to 3 years from that. I look at stuff from technical side some look at it from a superficial side like you suggested I do and most people do in this country do. If you look at the democratic party plan for this country of free everything .it's building steam fast because all of the wealth is concentrated in 10% of the USA population ,but the pay check to pay check population have the voting power if they vote in all free for me you won't be able to keep up with the taxes let alone worry about buying overpriced farmland. I am lucky I didn't bite on buying this overpriced farmland I am not trapped like my neighbors . You can debate any way you want on this but we still have unserviceable credit market debt which will ultimately crash and burn asset values when it has to be serviced and it's my opinion it will have to be but it doesn't have to be yours.