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Profits and Buyer Demand Drive Farmland Values

Farmland values in the first half of 2022 benefitted 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.

State

Six-Month Change

One-Year Change

Five-Year Change

Ten-Year Change

Iowa (21)*

9.0%

36.2%

58.1%

62.7%

Nebraska (18)

8.7%

25.6%

27.8%

59.9%

South Dakota (22)

7.1%

20.8%

18.5%

86%

Wyoming (2)

15.3%

17.1%

50.9%

104.6%

*The parentheses indicate the number of benchmark farms appraised by FCSAmerica every six months to track values and trends in the real estate market.

Agriculture, like other industries, is paying more to do business. Input costs, interest rates and inflation are squeezing margins. But high grain prices continue to provide opportunities for positive profit margins.

Some of the factors influencing commodity prices today, including unrest in Ukraine and dry growing condition in areas of South America, likely will carry into 2023 and support continued strength in commodity prices. Margins ultimately will depend on input costs and a producer’s ability to manage cost increases and supply chain disruptions.

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. 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.

Below are state-by-state benchmark trends for the first six months of 2022. Also included are average sale prices and auction activity in each state:

Iowa 2022 land values

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.

The average sale price for unimproved cropland sold during the second quarter of 2022 was $13,147 per acre, a new record and nearly 25% higher than the average sale price for the same quarter in 2021.

Public land auctions, which accounted for 60% of all sales, were above normal in the second quarter of 2022. Compared to the same period last year, public land auctions were up 53%. However, total sales were down nearly 5.5% compared to the second quarter in 2021.

 

Nebraska Dryland 2022 land values
Nebraska Irrigated 2022 land values

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%.

The average per-acre price for dryland cropland in the second quarter was $4,445, while irrigated land for an average of $8,030.

Sales for both land types were down compared to the second quarter of 2021 – by more than 57% for dryland and nearly 63% for irrigated. As a share of total sales, public land auctions were up 14% from the second quarter of 2021 to 2022.

 

South Dakota 2022 land values

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%.

The average per-acre sale price in the second quarter reached a new high of $7,672, while sales declined 31% compared to the second quarter of 2021.

Wyoming: The cropland farm saw its value increase 8.2%, while the pasture unit saw a much bigger increase of 22.4%.

The number of completed sales declined 60% compared to the second quarter of 2021. The limited number and diverse nature of the sales, as well as highest and best use, create a challenge for identifying sales trends in Wyoming.

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FCSAmerica serves farmers, ranchers, agribusinesses and rural residents in Iowa, Nebraska, South Dakota and Wyoming. For inquiries outside this geography, use the Farm Credit Association Locator  to contact your local office.