Farmland values forecast from our friends at Farm Credit Services of American where Fallon Savage says after a wild year in 2022, things now are a little different:
“That’s really starting to stabilize as we head into the fourth quarter of 2023. Tight supply though, there’s just not a lot out there, and so that’s really going to drive at this point kind of where we’re starting to see values going forward and interest rates are having a really big impact on buying power in the market.”
Of course, that cost of money factor with interest rate hikes has several impacts:
Right now, a lot of buyers that we’re seeing have low debt levels across their entire land base and so they’re able to borrow on a little bit more ground. But when we look at the buying power related to interest rates, when rates were 4.75%, you could borrow up to $4700 an acre and still maintain a $300.00 an acre cash flow price. If you want to maintain that $300 per acre cash flow payment that’s now down to $3200.00 an acre that you can now borrow based on 8 1/2% interest, so the interest rate impact is real. It has impacted buying power and it’s potentially kept some buyers on the sidelines waiting.”
Lower commodity prices as well, another factor into the equation. Although she says in the stabilization they don’t see or forecast much of a drop off in values for the coming 6 to 8 months.