FARMLAND VALUES SETTLE DOWN

Market pace slows from galloping increases.

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Land values soared alongside the boom in farm income that began in 2020, but gains are becoming more modest now. Ag bankers and university analysts say farmland prices are likely to plateau in the near term.

In 2023, cropland values accelerated nationwide by 33% to a highest-ever average $5,460 per acre, according to the USDA. But this year, high interest rates and declining commodity prices are making buyers more selective in places such as Iowa.

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,” says Paul Schadegg, of the farm management and real estate firm Farmers National Company. Farmers dominate the land market, so agricultural profitability is a leading factor in determining whether prices rise or fall.

In surveys by the Chicago and Kansas City federal reserve banks, ag bankers said they expected flat farmland values through the summer. “With the lower grain prices, we can sense a little caution with spending on land and machinery,” an Iowa banker told the Chicago Fed.

In the Midwest, values noted in the first quarter were 4% higher than a year earlier, “the smallest year-over-year gain in threeand-a-half years,” the Chicago Fed noted. Values jumped by 10% in Wisconsin but only 5% in Illinois. The value of unirrigated land in the central Plains, according to the Kansas City Fed, was 6% higher in the first quarter than the same point in 2023, when land values increased by 9%.

In Iowa, where values were flat, heavy rains and flooding combined with selective purchasing to dampen the market, Farmers National said. Highly productive land in Indiana, Ohio, and Michigan held nearrecord-high values, but lower-quality land fell 5%–10%.