Higher commodity prices are putting cash in farmers’ pockets and as a result, farmland values are headed upward this year, said economist Brent Gloy. “The question most are considering is, ‘How high will farmland values adjust?'” asked Gloy in a blog.
“The two major factors driving farmland prices – income and interest rates – are both moving favorably,” wrote Gloy. “The farm economy in 2021 has started on a high note, with the farmland market poised to head higher. Record-large government payments and the commodity rally that started last summer boosted farm income. Interest rates are forecast to remain low, making it easier to buy farmland while also making farmland an attractive asset with a higher appreciation rate than other investments. “While many unknowns exist, it’s important to avoid getting caught in the hype of what might become a stream of bullish farmland data,” said Gloy.
Three regional Federal Reserve Banks reported last week that farmland values rose during 2020 and the farm economy was in its best shape in years. Six out of every 10 ag bankers expected farmland values to rise in the first months of this year, said the Chicago Federal Reserve.
“With the continued lower supply of land for sale on the market, increased demand is driving prices higher, especially for good cropland,” said Randy Dickhut of Farmers National Co., which describes itself as the largest U.S. farmland management and real estate broker. “Interest in land and ag land in particular grew in 2020. Looking ahead, if nothing unexpected happens to challenge the current land market, land prices will continue to firm up in 2021.”