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

Farm Credit Services of America (FCSAmerica) and Frontier Farm Credit are co-sponsoring a webinar series, Two Economists and a Lender. Our January installment featured Agriculture Economic Insights (AEI) co-founders David Widmar and Brent Gloy, Kirk Manker, chief appraiser and Ryan Wittler, product analyst. The webinar recording from January 20 is available. Explore upcoming webinars.

 
 

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

Past Six Months

Previous Year

Previous Five Years

Previous Ten Years

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. Also included is a snapshot of sales activity. FCSAmerica tracks every sale in its four-state territory:

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

Cropland sales in the last quarter of 2021 were up 36.5% compared to the same quarter in 2020.

Public land auctions through the fourth quarter of 2021 were up 62% compared to 2020.  As a percent of total sales, public auctions increased to nearly 50% of all sales in 2021. Realtor, private and sealed-bid sales decreased.

Iowa January 2022 land values

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

Unimproved cropland values are measured separately for dry cropland and irrigated cropland.

Nebraska dryland cropland prices tend to fluctuate due to the limited number of sales and location.

Fourth quarter dryland prices rose 44% compared to the third quarter and were up 27.4% compared to the fourth quarter of 2020. The number of dry cropland sales was down 9.7% compared to the fourth quarter in 2020.

Nebraska irrigated cropland prices increased 20% from the third quarter and were 35.8% higher than one year ago. The number of irrigated cropland sales in 2021 was 14% greater than in 2020.

Public land auctions increased 26% in 2021 compared to 2020. As a percent of total sales, public auctions increased slightly, private sales and sealed-bid auctions decreased slightly, and Realtor sales remained stable.

Nebraska dryland January 2022 land values
Nebraska irrigated January 2022 land values

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

Unimproved cropland values in the fourth quarter increased 11% from the previous quarter and 44.7% from the fourth quarter of 2020. The total number of cropland sales that occurred during the fourth quarter decreased 11.1% compared to the fourth quarter of the previous year.

The number of South Dakota public land auctions in 2021 increased 38% from 2020. As a percent of total sales, public auctions and Realtor sales increased, while private sales and sealed-bid auctions decreased compared to 2020.

South Dakota January 2022 land values

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 for the entire increase, which took place in the first half of 2021. 

Completed sales through the fourth quarter of 2021 decreased 20% compared to 2020. The limited number and diverse nature of the sales, as well as highest and best use, create a challenge in determining sales trends.

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