Each year, DTN publishes our choices for the top 10 ag news stories of the year, as selected by DTN analysts, editors and reporters. This year, we're counting them down from Dec. 19 to Dec. 30. On Jan. 1, we will look at some of the runners-up for this year. Today, we begin the countdown with No. 10 looking at surging farmland values.
MT. JULIET, Tenn. (DTN) -- In November, 73 acres of farmland in Sioux County, Iowa, sold for $30,000 per acre. It's a likely state record, but it's just the latest in a string of record-smashing farmland sales across the Corn Belt.
"About the time we say we've seen our last record sale, another one pops up," said Paul Schadegg, senior vice president of real estate for Farmers National Company in Omaha. In southeast Nebraska at the end of October, a 116-acre farm sold for $27,400 per acre, with the price driven up by two local farmers/businessmen who both wanted the tract,
"Good land continues to attract a strong amount of interest from buyers," he told DTN back in November.
Strong farm incomes during the past few years have incentivized farmers to expand their land base, and experts tell DTN that owner-operators make up the majority of buyers. Investors, who are more interested in using farmland as a hedge against inflation, are also buying when they can.
"Historically, farmland has been a great inflation hedge. In fact, the correlation is 1-to-1," said Steve Bruere with People's Company based in Clive, Iowa. "And we've seen investors being the high bidder at some farmland auctions."
Unlike residential real estate, rising interest rates haven't been enough to douse the flames of the farmland market, and buyers still outnumber sellers in the market, although Schadegg said record prices are pulling more land into the sales stream.
"And we are setting a new record for real estate sales in our company's 90 years of operation, not only because of higher prices, but the number of transactions is up, and the number of acres sold is up," Schadegg said.
The Kansas City Federal Reserve reports that the average interest rate on farm real estate loans was between 6% and 6.75% in the third quarter of 2022. Farmland values were up 20% from the same period last year. While that's big growth, it's actually the lowest increase since early 2021.
A number of experts that spoke to DTN earlier this year anticipate farmland prices will climb 10% to 15% in 2023. High input prices are likely to catch up with farmers in the year ahead, weighing on profits. Recession could cut demand, and interest rates will continue to rise.
"Not every sale will set a record," said Doug Hensley, president of Hertz Real Estate Services based in Nevada, Iowa. "The land market is not backing off, but it is going up at a slower pace than last year, and in some places, it is leveling off."
You can find No. 9 in DTN's top 10 list on Dec. 20.
Katie Dehlinger can be reached at email@example.com
Follow her on Twitter at @KatieD_DTN
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