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Farmland Values Up 14% Since 2021 — Can This Price Trend Continue?

·2 min read

According to the U.S. Department of Agriculture, the value of farmland across the country has risen by approximately 14% year over year to $3,800 per acre in August, marking its highest level since 2008. In certain states, quality cropland has seen a 20% rise in value so far in 2022. Strong commodity prices were the major driver behind the rising farmland real estate values.

Randy Dickhut, senior vice president for Farmers National Co. (FNC), said, “Recent FNC 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% jump in value across most Grain Belt states in 2021.”

Will This Trend Continue?

As there seems to be no end in sight to the Russia-Ukraine war, food prices are expected to be elevated in the upcoming months. Moreover, as tensions between Russia and the West intensify, the former is expected to cap exports of major crops and raw materials from surrounding ports in the near term.

Most farmers predicted this and are bidding on farmland that is coming up for sale in the near term. Farmer sentiment is already up 15 points to 117 in August. Farmland cash rentals are also witnessing a surge, with rent on agricultural land in Iowa rising more than 10% in May.

According to a survey conducted by Purdue University and CME Group Inc., 4-in-10 corn and soybean farmers expect farmland cash rental rates to rise next year, with 27% predicting a rate hike in the range of 5% to 10%.

Bottom Line

Despite concerns regarding rising input costs amid inflationary pressures, farmers are optimistic about strong commodity prices raising demand for vast acres of farmlands. This, along with strong demand from nonfarm investors, should drive farmland values over the next five years.

Latest farmland investment insights on Benzinga:

The farmland investment platform AcreTrader completed its fourth full deal cycle with total returns beating expectations. The sale of a value-add rice farm in the Mississippi River Delta generated an approximate realized return of 13.7% as compared with a projected target return of 8.3%. This is also the fourth fully realized deal to beat expectations, with the previous three producing annualized returns of 15% to 33%.

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