Optimism for U.S. Agriculture Carries Cropland Values to All-Time Highs

cornfield with center pivot

Farm Credit Services of America reports double-digit gains in last half of 2021 in Iowa, Nebraska and South Dakota

OMAHA, NEBRASKA -- An already strong farm real estate market gained momentum in the last half of 2021, supported by improved profitability, historically low interest rates and greater demand for all types of agricultural land. Year-end values in Iowa, Nebraska and South Dakota reached all-time highs in the latest benchmark farmland study from Farm Credit Services of America (FCSAmerica).

Farmland values in the three states increased by double digits in the past six months, as indicated in the chart below. This followed more than a year of steady improvement in the real estate market. In Wyoming, values in the last half of 2021 were up, but to a lesser degree due to drought conditions that have impacted profitability for ranchland, which has not experienced the gains seen in cropland.

State

Six Month

One Year

Five Year

Ten Year

Iowa (21)

25.1%

37.3%

45.3%

49.6%

Nebraska (18)

15.8%

22.1%

17.3%

47.6%

South Dakota (22)

12.9%

21.0%

10.6%

74.0%

Wyoming (2)

1.7%

10.0%

32.1%

79.0%

(The parentheses indicate the number of benchmark farms in each state tracked by FCSAmerica.)

Higher quality cropland has experienced the greatest surge in values, while average to below-average ground showed more modest gains or remained stable. Drought impacted demand for grassland. Even so, its value has remained stable on the whole.

Farmland values in Iowa and South Dakota are now well above the 2013-2014 peaks in the market. Nebraska, by comparison, is just above its previous peak.

State

Previous Benchmark Peak

Change from Previous Peak

Iowa

July 2013

+ 16.2%

Nebraska

July 2013

+ 1.6%

South Dakota

January 2014

+ 11.9%

 

A conflation of market forces contributed to the real estate market’s exceptional performance in the latter half of 2021. This included strong profits from high commodity prices, better-than-expected yields in several areas, government payments, historically low interest rates and increased demand from varying types of buyers, including investors.

Rising input costs for the 2022 production year are compressing margins somewhat, and interest rates are expected to tick up a bit. Tim Koch, chief credit officer at FCSAmerica, said this isn’t expected to negatively impact land values in the foreseeable future. Most producers, he said, anticipate another profitable year thanks to continued price opportunities, and interest rates likely will remain low by historical standards.

“Optimism drives the real estate market,” Koch said, “and optimism for U.S. agriculture is high.”

Below is a state-by-state summary of benchmark farmland values for the past six months:

Iowa: All 21 benchmark farms gained value, 19 by 10% or more and two by single digits.

Nebraska: Twelve benchmark farms experienced double-digit increases and three were unchanged.

South Dakota: Seventeen benchmark farms increased in value, 10 by double digits. Five experienced no change in value.

Wyoming: One cropland farm experienced a 3.1% increase while the pasture unit experienced minimal change in value.  For the year, benchmark values increased by an average of 10.0%, with the cropland benchmark accounting the entire increase, which took place in the first half of 2021. 

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 more than $35 billion in assets and $6.7 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.

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