Farmland Values Remain Strong, Expected To Stabilize In 2024

After multiple years of record land values, Farmers National Company (FNC) is expecting the market to stabilize in the year ahead.

In their January 2024 land values report, the company shared the sharp increase in farmland values has slowed, and values are holding strong.

“The key point, without a doubt, is resiliency," Paul Schadegg, FNC senior vice president of real estate operations, shared with U.S. Farm Report. "Even with all the pressures that we've seen - some declining commodity markets, interest rates being higher than what we're used to, and the cost of inputs - we really expected more of a settling of land values. And we really haven't seen it–no decreases to speak of and still some really strong sales out there in the country."

Demand for farmland has remained strong as well, though the focus has turned to high quality land that is available in a limited supply – something Schadegg says will help maintain current values. 

The limited supply of land is anticipated to continue as some landowners decide to hold their assets due to its value.

"When we look at the seller side, we have many sellers that are looking at their land right now and deciding that it's never been worth more than it is today and make that decision to sell. But at the same time, some of those sellers are looking at it and at the appreciation in value that they've seen over the last 20 to 25 years, and realizing that it's a very valuable asset that provides them a return and making the decision to hold that land. And that's keeping a certain amount of inventory off the market," Schadegg says.

FNC completed nearly 700 transactions across the Midwest in 2023 – a number that is below 2021 and 2022 levels but still above average for the company. Of those sales, 80% of the buyers have been local farmers and operators. 

"When this land market it really took off, the primary pool of buyers were operating farmers, and they continue to be the successful buyer of land," Schadegg says. "But behind that is the investor that is pushing them to the levels they are paying for the land."

As far as what may come in the year ahead, FNC expects the commodity markets and input costs to play a large role. And while easing interest rates and reduced inflation could help the farmland market, global uncertainty and U.S. political factors remain a wild card.

“Over the past 25 years, average land values have experienced steady growth following the 1980s farm crisis. Under a strong ag economy, Farmers National Company expects that trend to continue,” Schadegg says.  

The company breaks down what to expect by region as well. 

"Iowa continues to be a strong point, but also, Illinois and Indiana have picked up a little steam. And a lot of the sales that we're seeing out there are quite strong, in the $20,000 plus range," Schadegg says. "Another little pocket that has typically not seen a lot of activity in the recent past, but we have here in the last six to 12 months, is northwest Missouri. There's some very good quality land that hasn't changed hands much in the past, and there's been some great competition there."