Higher interest rates and lower returns from rented land are among indicators “suggesting land value reductions of around 3 percent in 2025,” said three agricultural economists at the farmdoc daily blog. “A 3 percent decline would be in line with observed adjustment since the 1980s as well as expectations from professional farm managers surveyed in 2024.”
The cost of financing land purchases rises along with interest rates, which also make assets such government securities more attractive. “Both factors would tend to soften the value of assets such as farmland,” wrote economists Nick Paulson and Gary Schnitkey of the University of Illinois and Carl Zulauf of Ohio State University. Meanwhile, lower commodity prices and high production costs have meant lower returns per acre. Farmland values in Illinois have fallen year to year only four times since the 1980s, ranging from 1 percent to just over 5 percent, they said, in settling on 3 percent as likely this time.
“Still, multiple arguments for continued strength in farmland values can be made,” they said. Farm income has fallen but many farmers were in good shape after strong years from 2020-2022. And, farmland is good long-term investment. Only a small amount of land is offered for sale annually, which helps to maintain its value.