Farmland prices keep climbing, according to USDA’s Land Values Report. Danny Munch, an economist with the American Farm Bureau Federation, talks about what farmers are facing…tape
“The Department of Agriculture’s Land Values Report shows that agricultural real estate values are up five percent, or an average of $200 an acre, to a record of $4,170 an acre over 2023 This includes cropland being up 4.7 percent to $5,570 an acre, and pastureland being up 5.2 percent to $1,830 an acre over last year. How much farmers are paying for rent for cropland has also reached record levels, with cash rent at 3.2% over last year.”
Munch says land values and cash rents are two key indicators used to measure the health of the farm economy.
“There’s two sides of the story here. The first being that land values continue to increase, which means land, which is farmers number one asset, has increased in value. This puts farmers in a stronger financial position when it comes to acquiring loans. When land values increases start to slow, though, like we’re seeing, the equity growth starts to slow as well. So banks might consider farmers high risk if their asset value is stagnating. On the cash rent side, higher cash rent is just another negative on the balance sheet. So seeing record levels here means breaking even is even harder.”
He says the value of ag land is something to keep an eye on moving forward.
“Ag land values have increased over the past year, which is a positive short-run sign for farmers looking to acquire loans, but a hurdle to those who rent land. If production expenses and those costs associated with them start to outpace the growth in land values – especially if this happens as crop prices fall – this could be problematic for farmers’ abilities to pay for inputs and make any form of profit.”
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