OMAHA, Neb. — The stronger land prices of late 2021 continued higher through the first half of 2022. After a calm period at the start of the year in which the land market remained steady, sales prices took another jump up as a result of the outbreak of war in Ukraine and ongoing inflation fears. Farmers saw stronger commodity prices and investors wanted a low-risk inflation hedging investment, which together propelled the competition for good cropland.
“Prices for good quality cropland are up 20 percent in some areas since the first of the year. Recent Farmers National Company auction sales demonstrate the strength in the land market so far in 2022. Good land that was selling for around $16,000 last fall sold for $19,000 to $21,500 per acre at company auctions in March. This increase in prices is on top of a 15 to 30 percent jump in value across most Grain Belt states in 2021,” said Randy Dickhut, senior vice president for Farmers National Company.
Growing world demand for grains and meats along with uncertain weather conditions brought good commodity price strength in the New Year, which generated a positive view for net farm income in 2022 and the next several years. The Russian invasion of Ukraine thrust food and ag into the spotlight, which in turn added to the world’s need for good cropland. Uncertainties grew from disruptions in input supply chains and the world food and grain trade.
With a return to a normal supply of cropland for sale, farmers who are looking forward to several years of higher grain prices have continued to aggressively bid for the land that did come up for sale during the past few months. Individual investors also stepped into the market as they looked at farmland as a safe, long-term inflation hedging investment. This combined heightened demand propelled land prices higher in 2022.
The question of the moment is, will land prices go even higher?
“Farmers, landowners and the agricultural industry are facing more uncertainty at this moment than almost any other time. The Ukrainian invasion has thrown in a multitude of short and long-term unknowns in the food and ag world,” Dickhut said.
Inputs like fuel and fertilizer are vastly more expensive, raising the cost to produce a crop while feed costs are much higher for livestock producers. Grain prices are at historic levels, but will these go higher or lower? Will farmer buyers become more cautious in their outlook to bid up land if input costs and supply chain issues escalate?
Inflation and stability concerns have come to the forefront when making investment decisions. These concerns increase the demand for land right now as it is generally accepted that farmland is a safe, secure, long-term investment during periods of inflation. Rising interest rates will increase the cost of land mortgages, which will have some damping effect on land prices. How far and how soon rates go up will determine the extent of the interest rate influence.
“The importance of secure and adequate food, fiber and fuel supplies has taken center stage throughout the world. United States agriculture, as the world’s most productive and secure grain and livestock supplier, comes to the forefront of world trade now and will continue in the future. Farmers realize the potential and are therefore willing to bid up land prices in order to control more acres for the years to come. Individual and fund investors are realizing this too and are stepping more into the farmland market,” Dickhut said.
Anything can change at a moment’s notice with the weather, commodity markets, world events and government actions. All will affect agriculture and therefore, the price of farmland, Dickhut noted. The supply of land for sale and how demand holds up over the next months also will be determining factors on land prices.
“With current land prices at heightened levels, most of the supporting factors remain in place at this time to keep values steady to firmer for the next six months. This outlook could be altered at any moment due to unexpected changes in a multitude of factors,” Dickhut added.
REGIONAL LAND VALUE REPORT
Corn Belt: Iowa, North Dakota, South Dakota, Minnesota
Farmland prices continued to rise in 2022 after significant increases in 2021.
“During the past few months, we have seen prices paid for quality cropland go above $20,000 per acre in Iowa, $15,000 per acre in South Dakota and one farm in North Dakota brought $12,000 per acre. A lot of land sells for less than these prices, but the high ones are catching everyone’s attention,” said Brian Mohr, area sales manager for Farmers National Company.
Increased amounts of land came on the market at the end of 2021 due to concerns about possible tax law changes along with the lure of higher sales prices. Demand from farmers and investors more than offset the additional farms on the market to drive land prices up significantly. Sales slowed down in early 2022, but demand remained strong.
Iowa led the market activity in late 2021 with more sales and higher prices.
“The amount of land sold by Farmers National Company in Iowa last year was up 152 percent over the previous year, with auction sales up 129 percent year over year. Our company auctioned five times more land in the last part of 2021 than in the last quarter of 2020,” noted Tom Schutter, assistant sales manager for Farmers National Company.
“The best way to sell cropland right now is to employ a competitive bidding process in order to see what the market is willing to pay at any given time. Farmers National Company has had great success using simulcast and online bidding to get the best price for our clients,” Schutter continued.
“This summer, we expect strong prices to continue. This is contingent on world events, grain production and how rising interest rates and higher input costs will impact buyer demand for farmland,” Mohr added.
Eastern Corn Belt: Illinois, Indiana, Ohio, Michigan, Kentucky
Farmland prices continued to rise in 2022 after significant increases in 2021.
“During the past few months, we have seen prices paid for quality cropland go above $21,000 per acre in Illinois, $17,000 per acre in Indiana and $16,000 in Ohio. A lot of land sells for less than these prices, but the high ones are catching everyone’s attention,” said Linda Brier, area sales manager for Farmers National Company.
Increased amounts of land came on the market at the end of 2021 due to concerns about possible tax law changes along with the lure of higher sales prices. Demand from farmers and investors more than offset the additional farms on the market to drive land prices up significantly. Sales slowed in early 2022, but demand remained strong.
Auctions led the market activity in late 2021 and early 2022 with more sales and higher prices.
“The amount of land sold by Farmers National Company by auction during the fall and spring sales season was up 106 percent over last year. Our company auctioned five times more land in the last part of 2021 than in the last quarter of 2020,” Brier noted.
“The best way to sell good cropland right now is to employ some type of competitive bidding process in order to see what the market is willing to pay at any given time. Farmers National Company has had great success using simulcast and online bidding to get the best price for our clients,” Brier added. “This summer, we expect strong prices to continue. This is contingent on world events, grain production and how rising interest rates and higher input costs will impact buyer demand for farmland.”
Nebraska, Kansas, Missouri, Oklahoma, Texas, Arkansas
Farmland prices continued to rise in 2022 after significant increases in 2021.
“During the past few months, we have seen prices paid for quality cropland go above $13,500 per acre in Nebraska, $14,500 per acre in Missouri and $7,000 in central Kansas. A lot of land sells for less than these prices, but the high ones catch everyone’s attention,” said Paul Schadegg, area sales manager for Farmers National Company.
Increased amounts of land came on the market at the end of 2021 due to concerns about possible tax law changes along with the lure of higher sales prices. Demand from farmers and investors more than offset the additional farms on the market to drive land prices up significantly. Sales slowed down to normal in early 2022, but demand remained strong.
Auctions led the market activity in late 2021 and early 2022 with more sales and higher prices.
“The amount of land sold by Farmers National Company by auction during the fall and spring sales season was up 106 percent over last year. Our company auctioned five times more land in the last part of 2021 than in the last quarter of 2020,” Schadegg said.
“The best way to sell good cropland right now is to employ a competitive bidding process in order to see what the market is willing to pay at any given time. Farmers National Company has had great success using simulcast and online bidding to get the best price for our clients,” Schadegg added. “This summer, we expect strong prices to continue. This is contingent on world events, grain production and how rising interest rates and higher input costs will impact buyer demand for farmland.”
— Farmers National Company