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Farmland Values Inch Higher in Farm Credit Study

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MAHOMET, Ill. — Farmland values throughout central and southern Illinois increased 8.1% on average from last year, according to the 2023 study of 20 benchmark farms by the Farm Credit Illinois (FCI) appraisal team. The study has occurred annually since 1974.

Land values had a dramatic run-up beginning in 2003, until peaking in 2014. The first decline in more than a decade began in 2015 and continued a slight decline through 2018. From that point, land values increased again for five consecutive years, hitting new highs in 2023. While this sets a new peak for the study, 2023 values rose more moderately than reported in 2022.

Fifteen of the 20 benchmark farms increased in value while one showed a slight decline. Results across all land classes showed considerable variation, reinforcing that agricultural real estate is a location-specific asset. When considering the individual benchmarks values, the year-over-year changes ranged from -5.3% to +31.3%.

“Farmland in 2023 continues displaying its strength despite rising interest costs,” says Kent Reid, Farm Credit Illinois chief appraiser. “A new peak in the market was set once again, influenced by profitable commodity prices, constant demand coupled with limited supply of farmland, and stabilized balance sheets on many farms.”

The 2023 benchmark update for the Farm Credit Illinois territory shows continued strength in the farmland market. The economic health of farmers and farm owners is mostly stable, but there are still pressures on farmers’ financial positions. Increasing interest rates, rising cash rents, and fluctuations in commodity prices will be a challenge for the upcoming year. Overall, an increase of 8.1% indicates a solid market throughout FCI’s 60-county territory. Farmland values hit record highs in 2023 and all signs indicate they will remain at this level in the near-term.

Read an in-depth analysis in the full report at www.farmcreditIL.com/benchmark.

— Farm Credit Illinois

Iowa Cash Rent and Land Values

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DES MOINES — Cropland cash rent paid to Iowa landlords in 2023 averaged $269.00 per acre according to the USDA, National Agricultural Statistics Service. Non-irrigated cropland rent averaged $269.00 per acre, $13.00 above last year. Irrigated cropland rent averaged $271.00 per acre, $19.00 above 2022. Pasture rented for cash averaged $60.50 per acre, $1.00 above the previous year. 

Iowa‘s farm real estate value, a measurement of the value of all land and buildings on farms, averaged $9,930 per acre in 2023, according to the USDA, National Agricultural Statistics Service – Land Values 2023 Summary. This was up 6 percent, $530 per acre higher than last year’s value. 

Cropland, at $10,100 per acre, was $750 higher than last year. Pasture, at $3,400 per acre, was $100 above last year.

— USDA National Agricultural Statistics Service

Minnesota Cash Rent and Land Values

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ST. PAUL, Minn. — Cropland cash rent paid to Minnesota landlords in 2023 averaged $198.00 per acre according to the USDA, National Agricultural Statistics Service. Non-irrigated cropland rent averaged $198.00 per acre, $13.00 above last year. Irrigated cropland cash rent averaged $215.00 per acre, $15.00 above 2022. Pasture rented for cash averaged $30.00 per acre, $3.00 above the previous year. 

Minnesota‘s farm real estate value, a measurement of the value of all land and buildings on farms, averaged $6,600 per acre in 2023, according to the USDA, National Agricultural Statistics Service – Land Values 2023 Summary. This was up 7 percent, $450 per acre higher than last year’s value. 

Cropland, at $6,820 per acre, was $620 higher than last year. Pasture, at $2,100 per acre, was $90 above last year.

— USDA National Agricultural Statistics Service

Wisconsin Cash Rent and Land Values

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MADISON, Wis. — Cropland cash rent paid to Wisconsin landlords in 2023 averaged $156.00 per acre according to the USDA, National Agricultural Statistics Service. Non-irrigated cropland rent averaged $151.00 per acre, $6.00 above last year. Irrigated cropland rent averaged $268.00 per acre, $18.00 above 2022. Pasture rented for cash averaged $37.50 per acre, $1.50 above the previous year. 

Wisconsin‘s farm real estate value, a measurement of the value of all land and buildings on farms, averaged $6,200 per acre in 2023, according to the USDA, National Agricultural Statistics Service – Land Values 2023 Summary. This was up 9 percent, $500 per acre higher than last year’s value.

Cropland, at $6,710 per acre, was $710 higher than last year. Pasture, at $3,150 per acre, was $250 above last year.

— USDA National Agricultural Statistics Service

USDA NASS Northwest Region Cash Rents and Land Values

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OLYMPIA, Wash. — USDA NASS released its cash rents and land values statistics for the Northwest Region.

Cropland Cash Rent
Cash rent expense for all cropland in Idaho is estimated at $197.00 per acre for 2023, up $3.00 per acre from last year. Irrigated cropland is estimated at $266.00 per acre, up $4.00 per acre from 2022. Non-irrigated cropland rental expense is $66.00 per acre, up $0.50 per acre from last year. Oregon producers paid $179.00 per acre for all cropland, down $3.00 per acre from 2022. Irrigated cropland is estimated at $259.00 per acre, down $2.00 per acre from 2022. Non-irrigated cropland rental expense is $107.00 per acre, up $6.00 per acre from last year. In Washington, all cropland rental expense is $238.00 per acre for 2023, up $21.00 per acre from the previous year. Irrigated cropland is estimated at $440.00 per acre, up $10.00 per acre from 2022. Non-irrigated cropland rental expense is $76.00 per acre, down $0.50 per acre from last year.

Pasture Cash Rent
Pasture cash rent expense was $13.00 per acre in Idaho for 2023, up $0.50 per acre from 2022. In Oregon, pasture cash rent was $11.50 per acre, unchanged from the previous year. Washington producers paid $9.00 per acre for pasture rent, up $1.00 per acre from last year.

Farm Real Estate Value
Idaho farm real estate value, a measurement of the value of all land and buildings on farm, averaged $3,810 per acre for 2023, up $110 per acre from the 2022 value. Oregon farm real estate value averaged $3,180, up $140 per acre from 2022. In Washington, farm real estate value averaged $3,190, up $90 per acre from previous year.

— USDA NASS

North Dakota pastureland values increase faster than cropland values in 2023

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FARGO, N.D. — North Dakota pastureland values were up 17.1% from 2022 to 2023 while pastureland rents were up 7.1% during the same time, says Bryon Parman, North Dakota State University (NDSU) Extension agricultural finance specialist.

Data for pastureland rents and values are from the North Dakota County Rents and Prices Annual Survey, found online at https://www.land.nd.gov/resources/north-dakota-county-rents-prices-annual-survey, and then put into weighted averages and NDSU Extension regions. The northern Red River Valley, southern Red River Valley and northeastern regions of North Dakota are excluded from the analysis due to low numbers of pastureland sales and rents as well as low livestock numbers.

“Of the more prominent livestock regions in North Dakota, the southeastern region had the costliest pastureland at $1,910 per acre, up 23.3% from a year ago, which was the largest gain,” says Parman. “However, while the southeastern region had the largest increase, all areas were up over 13% as far as pastureland values.”

The smallest increase was the north-central region up 13.9% from $890 per acre to $1,014 per acre. The other NDSU Extension regions saw increases between 14.9% and 17%.

Rents for pastureland were up as well.

“Pastureland rents are low in terms of dollars per acre compared to cropland values, so a $1 or $2 per acre change in the data can have a significant impact on the percentage changes, such as the northwestern region, which went from $10 per acre to $12 per acre,” explains Parman. “Therefore, the percentage changes in rental rates should be viewed with caution. However, the fact that pasture rents were up across the board and accompany a large increase in pastureland values, it is a justified conclusion that pastureland rents are increasing in North Dakota.”

The costliest rents in the state tends to be in the southeastern region at $34 per acre where stocking rates are a bit more dense, with the least costly being in the northwestern region where stocking rates tend to be lower.

The 17.1% increase in pastureland values is the largest single year increase in more than a decade. This increase is larger than that of 2014 and 2015 when feeder cattle prices hit record highs. Though cattle prices have been relatively strong over the last year or two, it has come with high feed costs as feed grain commodity prices have remained high.

“High feed costs may be partially driving pastureland prices as producers search for alternatives to buying feed for livestock, hoping instead to use grass as an alternative,” concludes Parman.

— NDSU Extension

North Dakota Cropland Values Up Double Digits Again in 2023

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FARGO, N.D. — Despite high production costs to start 2022, net farm incomes remained high helping facilitate a sharp rise in land prices for 2023, says Bryon Parman, North Dakota State University (NDSU) Extension agricultural finance specialist.

The statewide average land price increase from 2022 to 2023 was 13.46%, which is higher than last year’s increase of 10.9%. Rents were also up considerably, rising 6.82% statewide, marking the largest increase in 10 years.

The data for the rental rate and land value changes comes from the North Dakota Department of Trust Lands County Rents and Prices Annual Survey found online at https://www.land.nd.gov/resources/north-dakota-county-rents-prices-annual-survey. The data is then combined into NDSU Extension regions using a weighted average based on the number of county acres.

The largest increase in land values occurred in the east-central and southern Red River Valley regions with both increasing over 20%. The north-central and northeastern regions saw the next largest increase at 15.5% and 14.1%, respectively. The south-central and southeastern regions increased between 11.5% and 13.5% for the two regions. Smaller increases occurred in the southwestern region at 9.4% and the northern Red River Valley which increased 6%. The northwestern region tends to fluctuate a bit more due to a lower number of observations, showed the only decline at -0.84%.

“Overall, the statewide average cropland value moving into 2023 was $2,863 per acre,” says Parman. “The most expensive farmland in North Dakota remains in the southern Red River Valley region at an average of $5,494 per acre while the least costly is in the northwestern region at $1,399 per acre.”

Over the last five years, the southeastern region cropland values have surpassed the northern Red River Valley, with the southeastern region increasing faster. In the most recent survey, the southeastern regional land values were $3,886 per acre while the northern Red River Valley values were $3,605 per acre.

The east-central region was also over $3,000 per acre for the first time, coming in at $3,029. The other three regions including the north-central, northeastern and south-central all came in between $2,100 per acre and just over $2,300 per acre. The southwestern region came in just above the northwestern region at $1,653 per acre.

“Cropland rents were up across the board with the largest increase occurring in the east-central region at 11.88%,” says Parman. “The south-central and southeastern regions were both up between 8.7% and 9.7%. The north-central and northern Red River Valley regions were up between 5.6% and 6.8% while the northwestern, northeastern and southern Red River Valley regions were all up slightly less than 5%.”

The smallest increase in cropland rent occurred in the southwestern region with an increase of 3.25%. The statewide average cash rent on cropland was $79.90 per acre.

“Overall, 2023 marks the second largest increase in land prices in North Dakota in a row,” says Parman. “However, despite the increase in rents accompanying land price increases, the disparity between cash rents and land prices continues to grow wider. The capitalization rates (cap rate) with respect to farmland in North Dakota has been declining for decades.”

Parman continues, “The cap rate, which is the cash rent divided by the market value of farm land, in North Dakota in 2023 is around 2.65%. In 2012, the cap rate on cropland was closer to 3.8%, and in the 1990s cap rates were mostly between 6% and 9%. The simple cap rate reflects the income generated, relative to the value of land not accounting for capital gains and at 2.65%, is the lowest it has been in more than 40 years.”

Resources:

— NDSU Extension

Iowa farmland values hit all-time high

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AMES, Iowa — One year after skyrocketing 29%, the average value of an acre of Iowa farmland jumped another 17%, or $1,660, to $11,411 per acre. The nominal value of an acre of farmland is again higher this year than at any point since Iowa State University began surveying values in 1941. When adjusting for inflation, the 2022 average value surpasses the previous inflation-adjusted record value set in 2013 for the first time.

Farmland values in Iowa have increased more than 15% in a year a handful of times since 1941, most notably in 2011, when values rose 32.5%, and last year, when values rose 29%.

While inflation was a major factor that drove the increase last year, Wendong Zhang, an associate professor of economics and faculty affiliate of Center for Agricultural and Rural Development (CARD) at Iowa State University, said that it did not play as much of a factor as commodity prices, limited land supply, and low interest rates through summer 2022 did this year.

Zhang, who is responsible for conducting the annual survey, said that inflation rates this year are similar to those from last year, but the Federal Reserve has used aggressive rate hikes since this summer to curb the problem. “The Federal Reserve seems to be determined to keep raising interest rates until they get a firm control on inflation. This is a tricky balance because larger and quicker interest rate hikes run the risk of slowing down the economy, potentially to a recession,” Zhang said. While he noted that higher interest rates put downward pressure on the land market, the effects typically don’t show up in land prices for one or two years.

While the Federal Reserve has been raising interest rates, Zhang said that 81% of Iowa farmland is fully paid for, so the higher interest rates don’t always affect farmers’ land purchasing decisions. This is especially true when high inflation makes the real interest rates negative or low, which tends to incentivize more borrowing and investment. Furthermore, a significant portion of respondents said that cash on hand was a positive factor influencing land values. “Farmers have a lot more cash on hand and supply chain issues led to a shortage of equipment, so the money that farmers normally spend on equipment is now devoted to land,” he said.

As for commodity prices, Zhang said they have been strong this year and yields have been higher than expected, despite the weather challenges. “Not only are crop prices much higher, livestock and poultry prices are also significantly higher, translating into higher farm income and profits,”  he said.

For the first time, this year’s survey asked respondents’ views of current farmland values. Zhang said that 70% of respondents feel that current land values are “too high” or “way too high.” “The higher land values do create an even higher entry barrier for beginning farmers, and the following increase in cash rents along with higher input costs could negatively affect producers, especially those with a lot of rented ground” he said.

Zhang said that 48% of respondents forecasted an increase in farmland values one year from now, while 24% forecasted no change and 28% expected lower values. He said that most respondents expect the one-year value to either be the same or increase roughly 5%–10%.

Looking five years ahead, Zhang said that 60% of respondents believe land values will increase 10%–20% from current values, while about 24% forecast a decline in prices.

Land Values by County

For the second year in a row, all 99 of Iowa’s counties showed an increase in land values. However, for the first time in almost a decade, Scott County did not report the highest overall value. O’Brien County topped the list this year, reporting a 20.6% increase, or $2,818 per acre, to $16,531. Decatur County again reported the lowest value, though land values there increased 10%, or $505 per acre, to $5,566.

Mills, Fremont, Page, and Montgomery Counties reported the largest percentage increase, 21.6%, while O’Brien County saw the largest dollar increase, $2,818 per acre. Wayne, Lucas, Appanoose, and Decatur Counties saw the smallest percentage increase, 10%, while Decatur County saw the smallest dollar increase, $505 per acre.

Land Values by District

Land values increased across all crop reporting districts. The Northwest district reported the highest overall value, $14,878 per acre, the largest percentage increase, 22.3%, and the largest dollar increase, $2,714 per acre.

The South Central district reported the lowest values, $6,824 per acre, and the lowest dollar change, $790 per acre, while the Southeast district saw the smallest percentage increase, 9.8%.

Land Values by Quality

Statewide, low-quality land now averages $7,369 per acre, an increase of 15.2% or $972 per acre. Medium-quality land now averages $10,673 per acre, an increase of 17.7% or $1,602 per acre. High-quality land now averages $13,817 per acre, an increase of 16.8% or $1,983 per acre.

The Northwest district reported the highest values for low-, medium-, and high-quality land at $9,569, $13,710, and $17,121 per acre, respectively. The South Central district reported the lowest values for low-, medium-, and high-quality land at $4,379, $6,872, and $9,478 per acre, respectively.

Low-quality land saw the largest percent increase in the Northeast district, 19.8%, while the Northwest district saw the largest dollar increase, $1,481 per acre. Low-quality land saw the smallest percent increase, 7.9%, and the lowest dollar increase, $321 per acre, in the South Central district.

Medium-quality land saw increases of more than 20% in the West Central, Northeast, Southwest, and Northwest districts, which respectively showed increases of 20.1%, 21.9%, 22.7%, and 24.2%. The Northwest district also saw the largest dollar increase in medium-quality land, $2,688 per acre. The Southeast district showed the lowest percent increase in medium-quality land, 6.2%, and the lowest dollar increase, $508 per acre.

High-quality land in the West Central, Southwest, and Northwest districts all saw increases of more than 20%—20.6%, 21.2%, and 22.3%, respectively. The Northwest district reported the largest dollar increase in high-quality land at $3,124 per acre. The Southeast district reported the smallest percent change in high-quality land, 10.3%, and the smallest dollar increase, $1,201 per acre.

Factors Influencing the Land Market

The most frequently mentioned positive factor influencing the land market was higher commodity prices. Limited land supply and low interest rates through summer 2022 were the second- and third-most frequently mentioned factors. Other frequently mentioned factors included cash on hand and high credit availability, strong yields, a good farm economy, and strong demand.

The most frequently mentioned negative factor affecting land values was interest rate hikes. Other noted factors included concerns about higher input costs and stock market volatility and economic uncertainty were the second- and third-most frequently mentioned negative factors.

Land values were determined by the 2022 Iowa State University Land Value Survey, conducted in November by the Center for Agricultural and Rural Development at Iowa State and Iowa State University Extension and Outreach. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the REALTORS® Land Institute, and the U.S. Department of Agriculture.

The Iowa State Land Value Survey is based on reports by agricultural professionals knowledgeable of land market conditions, such as appraisers, farm managers, agricultural lenders, and actual land sales, and is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. The 2022 survey is based on 668 usable responses from 443 agricultural professionals. Seventy-one percent of the 443 respondents answered the survey online.

The Iowa State Land Value Survey was initiated in 1941, the first in the nation, and is sponsored annually by Iowa State. The survey is typically conducted every November and the results are released mid-December. Only the state average and the district averages are based directly on the Iowa State survey data. County estimates are derived using a procedure that combines the Iowa State survey results with data from the U.S. Census of Agriculture.

CARD offers a web portal at https://www.card.iastate.edu/farmland/ that includes visualization tools, such as charts and interactive county maps, allowing users to examine land value trends over time at the county, district, and state level.

For over 60 years, the Center for Agricultural and Rural Development at Iowa State University has conducted innovative public policy and economic research on local, regional, and global agricultural issues, combining academic excellence with engagement and anticipatory thinking to inform and benefit society.

—  Center for Agricultural and Rural Development at Iowa State University

Historic increases in farmland values, cash rents

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AMES, Iowa — The annual land value survey and cash rent surveys from USDA’s National Agricultural Statistics Service confirm what many in Iowa’s agriculture industry already expected: land values and cash rents are up significantly.

According to an article in the September edition of the Ag Decision Maker newsletter, a publication of Iowa State University Extension and Outreach, Iowa cropland values rose 19.7% on average over the past year, from $7,810 per acre to $9,350 per acre. Pastureland is up 9.3%, now averaging $3,300 per acre.

As for cash rents, the survey shows an increase of 9.9% for non-irrigated cropland, for an average of $256 per acre in 2022. Cash rent for an acre of Iowa pastureland is up to $59.50 per acre on average, an increase of 2.6% and a new record high level.

The article is authored by Lee Schulz, associate professor in economics and livestock economist at Iowa State University. He said it’s important to keep in mind these numbers are statewide averages from USDA, and that county and individual parcel results could be higher or lower, depending on many factors.

Schulz said he would not be surprised to see further increases to pastureland, because historically, pasture values tend to follow cattle and corn prices.

As a state average, cropland values are the highest ever, and cash rents are second only to 2014, when they reached $260 per acre.

The current increases come at a very different time in the economy, however.

“The 2022 general economy is more anemic,” according to Schulz. “Inflation is around 8.5%, which could buoy land values. Potential for a steeper economic slowdown could dampen interest in buying land, and rising interest rates and any slippage in net farm income could erode farmers’ ability to service land debt.”

While the future is difficult to predict, Schulz said if inflation remains high and interest rates continue to climb, the impact will eventually be felt.

“Agriculture does not operate in a vacuum,” he said. “The Federal Reserve is actively raising interest rates and eventually that has a negative correlation with land values and farmers’ ability to borrow.”

For farmers and landowners having negotiations over land sales and rent, Schulz said the USDA surveys are useful, but that decisions should include other surveys and factors, as well, such as the annual Iowa State University Land Value Survey, released at the end of each year, and the Iowa State University Cash Rent Survey, released each May.

“The USDA survey findings help provide one data point for conversations, but the agricultural community should continue to weigh other sources of information and factors when making decisions about cash rents and sales,” said Schulz.

— Iowa State University Extension and Outreach

Wisconsin cash rent and land values

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MADISON, Wis. — Cropland cash rent paid to Wisconsin landlords in 2022 averaged $149.00 per acre, according to the USDA National Agricultural Statistics Service. Non-irrigated cropland rent averaged $145.00 per acre, $12.00 above last year. Irrigated cropland rent averaged $250.00 per acre, $13.00 above 2021. Pasture rented for cash averaged $36.00 per acre, $1.00 below the previous year. 

Wisconsin’s farm real estate value, a measurement of the value of all land and buildings on farms, averaged $5,700 per acre in 2022, according to the USDA, National Agricultural Statistics Service – Land Values 2022 Summary. This was up 10 percent, $510 per acre higher than last year’s value. 

Cropland, at $6,000 per acre, was $720 higher than last year. Pasture, at $2,900 per acre, was $380 above last year.

— USDA National Agricultural Statistics Service

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