The U.S. Department of Agriculture reports that U.S. farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,140 per acre for 2018. This is up $60 per acre (1.9%) from 2017 values.
Regional changes in the average value of farm real estate ranged from an 8.3% increase in the Southern Plains region to 1.4% decrease in the Northern Plains region. The highest farm real estate values were in the Corn Belt region at $6,430 per acre. The Mountain region had the lowest farm real estate value at $1,140 per acre.
U.S. cropland values averaged $4,130 per acre, an increase of $40 per acre from the previous year. In the Southern Plains region, the average cropland value increased 4.7% from the previous year, while in the Lake region, cropland values decreased by 0.6%.
Pasture value in the U.S. increased by $40 per acre (3%) from 2017 values. The Southern Plains region had the highest increase from 2017 at 5.6%. The Pacific region remained unchanged at $1,650 per acre.
Top Producer editor Sara Schafer reported earlier this year that the average value of farm real estate increased by 47% between 2009 and 2017, according to the 2018 U.S. Baseline Outlook compiled by Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.
As you can see from the above chart, however, farmland values have declined slightly in recent years.
Schafer explains that key factors can impact land prices:
1. Interest Rates. “On March 21, the Federal Reserve raised the key interest rate by 0.25% to 1.75%,” Schafer said. “This is the highest level it’s been since 2008. In December, Fed officials said they intend to raise rates three times in 2018. The U.S. economy has the potential to expand 2.7% in 2018, according to the Fed, and steeper hikes could be in store for 2019 and 2020.”
2. Commodity Prices. “Corn and soybean prices directly affect farmland values,” Doug Hensley, president of real estate services for Hertz Farm Management said in Schafer’s article. She adds that “after reaching all-time highs a few years ago, commodity prices remain subdued.”
3. U.S. Trade Policy. Trade tariffs and disagreements have become a critical factor in farm prices this year. So far, the situation shows no signs of improvement.
“Exports are a big part of our corn and soybean market,” Hensley said in the article. “Any significant change in our trade markets will have a significant impact on farmland values.”
4. Farm Income. “Since 2013, income from farming and ranching has fallen by 50%,” Schafer said. “Meanwhile, farm debt has increased more than 30% in the past decade, according to USDA.”
“Lenders have become more cautious in the amount of money they will loan for land purchases,” Randy Dickhut, senior vice president of real estate operations for Farmers National Company told Schafer. “Lower incomes and reduced cash flows have been a major contributor to the gradual decline in land values the past four years. Projected lower incomes in 2018 will continue the pressure on land values.”
Randy Dickhut, AFM, senior vice president of real estate operations with Farmers National Company in Omaha, Neb., said in an article by Jaleen Edwards in AgPro earlier this year that he believes land values will probably continue the slow decline that has been happening the past four years. This is despite the appearance of more recent stabilization. Surprisingly, good-quality land has – and will likely see in the future – a slight increase in prices, he said.
However, Dickhut also indicated in the AgPro article that “if we see more land for sale than expected, there will be downward price pressure, and of course, low commodity prices and low net farm income levels have a continued negative effect on land-buying interest.”