According to Farmers National Company, the agricultural land market has been “nothing short of exceptional during the past five years.” Gains in value are prevalent across all classes of land in every region of the country. Strong commodity markets, moderate interest rates, buyer demand and an overall healthy agricultural economy have also supported the growth of land values during this time.

“But a lot has changed in the past 12 months, and even more has changed within the past five years,” said Paul Schadegg, senior vice president of real estate operations at Farmers National Company. “Moving into the second half of 2023 and the first half of 2024, we’ve experienced significant increases in interest rates, declining grain markets, and inflation. Despite these negative pressures, the land market has remained relatively resilient but shows signs of settling in general, including single-digit decreases in specific areas.”

One aspect of the agricultural land market is the long-term appreciation of land value. Over the past 25 years, land values have experienced a stair-stepping trend following the ups and downs of the agricultural economy. As grain markets and farm profitability rose, the land markets followed while leveling off as markets and profitability did the same. Schadegg said each plateau has set a new value standard sustained through production, demand and profitability.

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“A significant factor in maintaining the level of land values has been investor interest in the market. While these bidders are not always successful buyers of land, they are certainly involved in setting the floor on values as they bid up to the levels of their investment criteria. This segment of buyers also considers the long-term appreciation in value we have experienced in the past 25 years, the potential for future appreciation, and land’s value as a diversified asset,” Schadegg said.

INTEREST AND COMMODITY MARKETS

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As buyers consider land purchases during the second half of 2024, the additional expenses for interest and lower commodity markets will be at the forefront of their decisions. Schadegg said that the market value of land will adjust according to the level of demand and profitability potential.

“We anticipate variations in land value changes across our regions in the U.S. Areas with strong supply/demand scenarios, an expansion of alternative land use projects and irrigation water concerns may experience more dramatic increases or decreases in values,” Schadegg said. “There remains a strong appetite for land as an investment from outside investors and ag producers. The investor is looking for an asset that will produce an annual return, while the ag producer may look for expansion opportunities. Emotion comes into play when the ag producer is motivated by adjoining land, operation expansion, or land that has potentially never been offered for sale in the area.”

With farm operators being the largest segment of land buyers, the biggest impact on land values moving forward will be profitability in agriculture. If profit opportunities are limited, motivation to buy will decrease and, subsequently, pressure land values into a downward trend.

“Farmers National Company and our agents continue to see strong demand for real estate services across our marketing regions. Listing volume and closed transactions at the company match the pace we saw in 2023, with activity and interest building into the fall selling season. The listing volume and transaction results remain well ahead of the company’s five-year average,” Schadegg said.

Many upcoming sales have transitioned back to standard listings as sellers reserve the option to negotiate values in a changing land market.

“This is an exciting time for agriculture land owners across the U.S. Your land asset has never been more valuable than it is today. The strong demand for ag land and its historical appreciation in value will continue to support the current values as we progress into the second half of 2024,” Schadegg said.

South Central Region: Kansas, Eastern Colorado and Western Missouri

Headwinds and tailwinds have combined to keep the high-quality land market throughout western Missouri, Kansas, eastern Colorado, south-central Nebraska and north-central Oklahoma values steady throughout the past 12 months, according to Steve Morgan, area sales manager for the south-central region.

“While there have been a few small areas within those states that continue to see new highs, other areas have shown signs of a small retrace. This region has also begun to show a little price weakness in the average to below average quality land market,” Morgan said. “Drought, heat, lower inventories of land for sale and volatile commodities are still all at play across the region. So far this spring and early summer, the drought map has changed for the better and commodities have shown signs of occasional strength. These lead us to be very friendly to a strong fall and winter land market, especially if the industry continues to see a low inventory of farms for sale.” 

Western Region: Western Nebraska, Northwest Kansas and Northeastern Colorado

Farmland prices in central and western Nebraska and northeast Colorado have struggled to maintain the record highs of recent years, according to Cole Nickerson, area sales manager for the western region.

“High quality irrigated farmland remains in high demand with a low supply, which has helped keep prices elevated,” Nickerson said. “In contrast, lower quality farmland has experienced some discounting over the past six months. Rangeland prices have remained stable due to strong cattle markets. One would expect a sharp increase in rangeland prices with the strong cattle markets but that has not been the case. Low cattle inventories across the country have tempered demand.”

Recent sale highlights:

• 159.36 acres of Custer County, Neb., irrigated land for $10,100 per acre
• 160 acres of Valley County, Neb., irrigated land for $8,500 per acre
• 77.48 acres of Antelope County, Neb., dryland and pasture for $7,425 per acre

West-Central Region: Eastern Nebraska and Western Iowa

Land values in eastern Nebraska and western Iowa for the most part have stayed steady, said Chanda Scheuring, area sales manager for the west-central region.

“It will be interesting as we enter this fall selling season if those prices will continue to be supported given the lower commodity prices and higher interest rates. Some softening, especially on less productive land, may be seen over the next six months,” Scheuring said. “One thing that has been certain, there appears to be a tightening of supply in the market. As an industry, we have seen a lower volume of properties come up for sale over the past year. This, no doubt, has helped support prices, since demand for quality farm ground has remained high.”