Farmland Value Update - Winter 2022

As 2022 winds down, the farmland market remains strong. We’re still in a market that can have a record sale, but not every new sale will be a record, and the land market is simply not quite as “explosive” as it was in late 2021. Last fall we had an extreme high volume of farmland sales – and even greater demand for land – and every sale of quality seemed to set a new record for price. However, that was not sustainable in the long-term. This year, there are a few more headwinds as we approach winter, and the most recent land value surveys reflect a market that is leveling out.

Iowa Land Values

The Iowa Chapter of the REALTORS Land Institute reported a slight statewide average gain of 2.8% from March 1 to September 1, 2022, after climbing 14% in the prior six months. Farmland values in Iowa’s north-central crop reporting district showed no gain in the half of year from March to September, while the year-over-year increase in that district topped 12%. Western Iowa crop reporting districts saw the greatest annual strength in farmland values with gains from 18.6% to 22.9% compared to a year earlier, with average six-month gains ranging from 2.5% to 4.4%.

Illinois Land Values

Illinois farmland values also got off to a hot start in the first part of 2022. The survey of Illinois Society of Professional Farm Managers and Rural Appraisers, conducted the first two weeks of August, reported an 18% increase of farmland values compared to a year ago. However, over half (56%) of the survey respondents expected land values to simply remain steady for the rest of 2022, 15% predicted a slight decrease in land values (a drop between 1% and 3%), and just 12% expected a small increase in values of less than 3%.

Nebraska Land Values

Drought in the western Corn Belt (western Iowa, Nebraska, southeast South Dakota) may mute land values there. While the University of Nebraska’s farmland survey in early 2022 showed an average annual increase of 16%, the Kansas City Federal Reserve (which includes Nebraska, Kansas, Oklahoma and western Missouri) reported that the 2% gain in the second quarter in the value of farmland was the slowest increase since the end of 2020. Non-irrigated land in the district rose less than 1% in value in the second quarter of 2022. And the drought in the Kansas City Federal Reserve district has continued.

Minnesota Land Values

A quote from a recent report from the Minneapolis Fed tells the story here: “The value of an acre of farmland is a window into the fortunes of agriculture, and by that measure, farmers are making hay again.” For Minnesota and neighboring states in the Fed District, land values have now exceeded their previous high-water marks from 2014. And coming into the fall of 2022, Minnesota land values were reported to be 23% higher, year-over-year. Based on strong early harvest results, there is an expectation that values will be mostly stable this winter.

Looking Ahead

Recent land sales continue to reflect overall strength (and depth) in the marketplace. This strength is supported primarily by a still strong commodity price environment, while the depth of market is supported by a generally healthy ag sector. Having said that, higher interest rates and high prices for 2023 inputs are both beginning to factor into the farmland market. These divergent realities – good crop prices vs. high interest rates and high input prices – are somewhat offsetting to equate to a farmland market that has leveled off and is beginning to chop sideways. As mentioned in the opening paragraph, a record land sale is still possible here in late 2022, but not every sale will be a record like it was 12 months ago.