Farmland values and demand remain strong. Farmland values across the country climbed this year and hit record levels despite challenges like rising interest rates and extreme weather according to recently released data from the federal government. The USDA’s annual land values study found farm real estate values increased 7.4 percent over the past year. And the Federal Reserve Banks of Chicago and Kansas City reported nine and seven percent increases, respectively.
Eric Sarff is president of Murray Wise Associates, a farm real estate company here in Iowa, and says the farmland market behaves differently than traditional real estate, which is prone to peaks and valleys that coincide with the economy.
“In the Corn Belt-Midwest region, we kind of look at it typically as a good rule of thumb is seven percent appreciation year over year,” Sarff said. “But I think when you peel that back, it’s important to see that it’s really not a linear progression. What happens is you get into periods where you’re going to have softening or just flat pricing, then you get into periods like we’ve been in the last few years where you’re going to see significant increases, double digit year over year increases. So, it’s when you pull back from that and look at the bigger picture, that’s where you see where it’s leveled to possibly even negative for a year or two, then it goes into wild up swings, which is what we mean when we say plateaus and peaks.”
Sarff says the farmland market behaves differently than traditional real estate, which is prone to peaks and valleys that coincide with the economy.
“What we’ve seen really so far in ‘23, and what I think we’ll see the rest of the year is continued strong demand, which tells me we’re still somewhere in that in that peak stage,” Sarff said. “And just based off on what we’ve seen so far, you know, we work with a lot of institutional type investors, and there’s still a very large appetite out there for those kind of buyers and there’s still a lot of cash that’s out there looking to find a place to be in Ag, and I think if all that remains the case, I think we’re going to continue to see a lot of buyers flocking to farms and keeping prices where they are at.”
Regardless of which direction the market heads in the future, Sarff said it’s important for landowners to do their homework and stay informed about market movements, adding that it’s also incredible to watch this happen as the value of corn and soybeans have fallen by over two dollars per bushel.
