Profits, buyer demand push farmland values to all-time highs | Crop
Farmland values in the first half of 2022 benefited from continued profitability in agriculture. Benchmark farmland values increased in each of the four states served by Farm Credit Services of America (FCSAmerica), extending gains in the real estate market that began with the 2020 harvest and rising grain prices.
The rate of increase slowed compared to last year’s double-digit hikes. Even so, the average value for farmland is at all-time highs in Iowa, Nebraska, South Dakota and Wyoming.
Values are strong for high quality cropland, and stable to slightly higher for average to below-average cropland. Pasture values have held, with tight supplies mitigating the impact of drought and lower demand.
Agriculture, like other industries, is paying more to do business. Input costs, interest rates and inflation are squeezing margins. But producers still anticipate a profitable 2022.
“Despite increasing costs, opportunities for positive profit margins remain as a result of high grain prices and demand for protein products,” said Tim Koch, FCSAmerica’s executive vice president of business development.
“Some of the factors influencing commodity prices today, including unrest in Ukraine and dry growing conditions in areas of South America, likely will carry into 2023 and support continued strength in commodity prices. But profit margins ultimately will depend on input costs and a producer’s ability to manage cost increases and supply chain disruptions.”
People are also reading…
Producers are leveraging the past few years of strong profits to buy land and grow their businesses. Interest in farmland also has picked up among buyers who are looking for safe, long-term alternatives to a stock market rocked by global uncertainty and volatility. Both on-farm profits and demand for ground contribute to a real estate environment in which values remain strong for the foreseeable future, Koch said.
While this is good news for agriculture, it comes with a price. Cash rents generally lag changes in real estate values, as well as profitability in the industry. Producers anticipate significant increases in cash rents this fall as landlords adjust rates to reflect record land values and consecutive years of strong profits.
Here is a look at state-by-state benchmark trends in the first six months of 2022:
Iowa: Values rose by more than 10% on 9 of 21 benchmark farms, down from 19 farms in the latter half of 2022. Eight benchmark farms have values exceeding $15,000 per acre.
Nebraska: Four benchmark farms saw no change in values and two declined in value. The remaining 12 farms increased in value, eight of them by double digits, including one with an increase of 25.5%.
South Dakota: Values were unchanged on six farms and rose on the remaining 16. Seven farms experienced double-digit increases as high as 18.8%.
Wyoming: The cropland farm saw its value increase 8.2%, while the pasture unit saw a much bigger increase of 22.4%.
About Farm Credit Services of America: Farm Credit Services of America is a customer-owned financial cooperative proud to finance the growth of rural America, including the special needs of young and beginning producers. With nearly $37.8 billion in assets and $6.8 billion in members’ equity, FCSAmerica is one of the region’s leading providers of credit and insurance services to farmers, ranchers, agribusiness and rural residents in Iowa, Nebraska, South Dakota and Wyoming. Learn more at fcsamerica.com.