There’s no doubt the land market is seeing a shift. With more “no sales” flaring up across the country, it’s clear the land market is still adjusting to the current reality of lower grain prices. However, just when you think the pressure will cause land prices to fall, some eye-popping sales prove good-quality farm ground is still in high demand.
Last week, a piece of farm ground in Clinton, Iowa, sold for $18,100 per acre. In Missouri, a parcel of 696 acres in Ray County sold for $17,241 per acre.
How would you describe the current farmland market? According to Robin Reid, an Extension associate in the department of agricultural economics at Kansas State University, the focus is on land values. She says there is a slowdown taking place, but overall values have still been quite resilient.
“We are really looking a lot like we did back in 2014 to 2015, where we had lower commodity prices, but land values did hold fairly steady, even though farm income wasn’t supporting the values that we had,” Reid says.
She says the increases in cropland values over the past few years, specifically in Kansas, have been in the range of 18% to 20% for cropland. And while rates have managed to hold steady, Reid says there are signs of the start of a slowdown in the run-up in farmland values.
“USDA forecasts us to see about 8% increase this year over what we has been an 18% to 20%, but the point is we’re still going up,” Reid adds. “And I would say that’s probably going to just start slowing down, but not necessarily decreasing in the short-term.”
Farmers are still in the driver’s seat, but the direction of land values in the months and years ahead relies on one major factor: how long low profitability for row crop farmers persists.
“If we’re just in this for a couple of years, we probably won’t see a big effect on land values locally, but we’ll see more of a flattening of the market,” Reid says. “If we do experience this downturn for a number of years, I would expect we’re going to start seeing an impact on land values and definitely cash rental rates. We’re already hearing from farmers trying to negotiate those back down for next year.”
Rabail Chandio, an assistant professor of economics and Extension economist at Iowa State University (ISU), says the land market is softening for a couple reasons.
“As we are coming out of the pandemic highs with high government payments no longer there, with high farm income no longer supporting the land value, the market began to soften in 2023,” says Chandio, who is also the lead researcher of the ISU Land Value Survey. “What we’ve already experienced is a whole year of softening and then maybe slight falling of land values in certain parts of the of the state as well.”
She’s watching to see how much softer land values end up being in 2024, and now the question is if the softening will turn into a decrease in land values or just a solid plateau.
“I expect there to be some adjustments, slight falls, kind of like what we experienced at the end of 2017 to 2019, because we had very, very high land values, which are not really sustainable. We saw percentage increases of 17% year after year. That has to balance out a little bit,” Chandio explains. “We won’t see a crash in the market, from what I expect, but we will more than likely see slight decreases that are less than 5% or less than 10%, is my expectation. And that won’t really be unusual for the land markets either.”
Pasture and Range Prices Remain Strong
Farmers who rely on crops might be feeling the pinch, but higher cattle prices are creating a different story for cow-calf producers, which, in turn, is having a different impact on the value of pasture and rangeland.
“We have very high cattle prices right now, which is good for our cow-calf producers, but it does put a little more margin squeeze on those buying stockers or buying feedlot animals,” Reid says. “The hunting pressure has really helped our pasture and rangeland prices remain strong. As a result, that’s the category that will probably be more resilient than our cropland in Kansas.”
Reid says it’s not just livestock producers on the hunt for pasture and range to buy; it’s also those outside of traditional agriculture.
“Here in Kansas, if there’s pasture land, especially with hunting potential, we’re seeing a lot of out of state or even within state hunting pressure on land values. A lot of times they are competing with what our cattle producers can pay and then also looking at the purchase as an investment,” she explains.
Who’s Buying All This Farmland?
Navigating the land market is an ever-evolving job, and Reid has done extensive research on who owns land across Kansas and who’s buying.
“When my research started in 2015, 84.5% of all of our ag ground in the state was still owned by people here in Kansas,” Reid says. “If we fast forward seven years, the last time I was able to look at these data, we did see about a 2.5% uptick in the amount of land that’s moving out of state.”
She says some of that can be attributed to farm sales, but she’s also noticing a surge in the number of Baby Boomer landowners who are retiring or transitioning that land to the next generation, many of whom don’t necessarily still live in the state.
“There’s going to be a lot of heirs that just want to sell their parcel, so I do anticipate a lot of land being on the market,” Reid explains. “If we don’t have the farm income to support those purchases, we do have other sources of people who are willing to buy ground that will hopefully help stabilize our ag economy and the land market.”
Who owns the land and who’s buying is one of the biggest questions Reid consistently fields, especially with the growing conversation about foreign-owned farmland. Contrary to headlines, she says it’s still farmers.
With a surge in solar and wind leases across the state, it looks like more foreign investors are gobbling up farmland, but Reid says that’s actually not true.
“When the Agricultural Foreign Investment Disclosure Act was put into place back in the 1970s, nobody thought about wind and solar leases,” Reid says. “As you look at the report, it can be a little alarming the amount of area in our state that is foreign held. As I dove into that data itself, it’s actually a very small percentage, less than 0.25% of all of our public land here in the state is foreign held at the moment.”
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