Although farmland values are strong, some ag bankers report a downturn in prices in the central Plains after a three-year run-up in values, said senior economist Cortney Cowley of the Kansas City Federal Reserve on Wednesday. The majority of bankers, however, expect farmland values to hold steady or increase moderately.
During a University of Missouri webinar, Cowley said farm profit margins were expected to be thinner this year because of lower commodity prices and higher expenses. “Despite elevated costs, profit opportunities have remained solid for corn and soybean producers,” she said, with futures prices that are higher than average production costs. Wheat and cattle are in a similar situation, though hog farmers face the possibility of losses.
An indicator of the sector’s overall strength is stable to rising land values and land rental rates, despite higher interest rates and uncertainties about the U.S. economy, said Cowley. Cropland values have soared 33 percent since 2020 to a national average of $5,460 an acre this year, according to a USDA report.
“Now, I will say, every quarter, though, we start to see more and more ag lenders reporting overall declines in farm real estate values in our lending area, so there is some indication that we’re starting to see this often,” said Cowley. But that was not the prevailing sentiment among farm bankers responding to quarterly surveys by the Kansas City Fed. The regional Fed’s district includes Kansas, Nebraska, Oklahoma, Wyoming, Colorado, western Missouri, and northern New Mexico.
In August, the Kansas City Fed said farmland values were higher than “what may be expected given the current interest rate environment” and prospects for income from the land. “Some moderation in farmland values could be expected given these downward pressures, particularly for more marginal or less productive tracts. However, a steady supply of land sales and strong demand from farmers has likely supported broad resiliency of real estate values,” it said.
Last month, 115 acres of farmland in west-central Missouri sold at auction for $34,800 an acre, the highest known price in the country.
“One thing that we still continue to see is that there’s just a very limited supply of farmland available and really strong demand, particularly among farmers,” said Cowley. Farm income has been far above average since 2021, and growers have money in the bank. “Like I said, though, we are starting to see some signs of that softening in our surveys, but for really high-quality farmland, [demand] just remains very strong.”