Expect Stable Land Values in 2024

MT. JULIET, Tenn. (DTN) -- Farmland values have hit a plateau after three years of dramatic price increases, but one of the nation's largest farmland brokers thinks tight supplies and high demand will keep a retreat in values at bay.

Paul Schadegg, senior vice president of real estate operations at Farmers National Company, said despite pressure from sagging commodity prices and higher interest rates, sales over the past six months suggest steady values.

Local farmers and operators, who have built up significant levels of liquidity amid record farm incomes in recent years, continue to buy 80% of the land available for sale.

"Current market operators' equity positions have narrowed over the past year, and lending has increased as outlined in the most recent Ag Credit Survey from the Federal Reserve Bank of Kansas City," Schadegg said.

In 2023, the company completed 700 land transactions, accounting for $600 million of sales volume. "More than 55% of these transactions were conducted through the company's auctions, providing true market exposure. While this is off the extraordinary pace set in 2021 and 2022, it remains above the five-year company averages," Schadegg said in a news release.

Nick Westgerdes, area vice president for the east-central region, which includes Illinois and Wisconsin, said the number of sales has dropped about 35% from 2022.

"Many farms are still being sold at historically strong levels; however, record-breaking sales are now few and far between. We've seen several auction 'no-sales' over the past few months, which is a sign that seller and buyer expectations are not aligning quite as well as they were previously," Westgerdes said.

Iowa Area Sales Manager Tom Shutter said land quality is one of the biggest differentiating factors.

"Lower-quality properties, or farms with improvement needs, continue to struggle at public auction, often met with a smaller buyer pool and even a few no-sale scenarios," he said. "Conversely, higher-quality properties continue to see strong demand from farmers and local investors, with sale prices exceeding agent and seller expectations."

Schadegg said investors are generally looking for a return on their investment, diversification of their portfolio or a hedge against inflation. Farmland values have achieved steady appreciation since the 1980s farm crisis, and he'd expect that trend to continue under a strong ag economy.

Lower commodity prices are likely to make the next growing season tighter, profit-wise, and Shutter said that could contribute to less investor interest in the year ahead.

"Many land investors are looking at a stock market that continues to break new records, strong returns in money markets and with cash grain prices down nearly $2 per bushel, buyers are cautious about overspending on a particular piece of property," Shutter said. "Despite all of this, there is still a fair amount of land that will hit the market before spring planting, and we do expect the demand for the high-quality land to remain strong into the foreseeable future."

You can read more about the Farmers National Company's national perspective here: https://www.pappasmarketing.com/…

A regional breakdown can be found here: https://www.pappasmarketing.com/…

Katie Dehlinger can be reached at Katie.Dehlinger@dtn.com

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