After years of stagnation, cropland values rose an average of $1,300 an acre in the three years since the pandemic hit the United States, according to the Agriculture Department. Values mushroomed 33 percent at the same time farmers enjoyed back to back years of record-high farm income, with income forecast to be the third-highest this year.
The financial outlook for many farmers is favorable, thanks to high commodity prices, but higher interest rates are an ongoing concern, according to ag bankers surveyed by the Federal Reserve. Interest rates on loans to farmers were 3.5 to 4.5 percentage points higher in the opening months of this year than they were at the end of 2021.
High commodity prices and low interest rates helped drive farmland values in Iowa to an average of $11,411 an acre, up 17 percent from 2021, when they rose 29 percent, said Iowa State University’s annual Land Value Survey.
Flush with cash, farmers and investors have driven up farmland values this year at breathtaking rates — a 12 percent gain nationwide and more than 20 percent in three Farm Belt states. “Given recent experiences with fluctuations in the broader economy and prior farmland price dynamics, many market participants express concern that the rapid increase in farmland prices is a signal of a speculative bubble,” said three economists.
Persistently strong commodity prices in the opening months of the year fueled a sharp growth in farmland values throughout the Midwest and Plains, said a Federal Reserve report on Thursday.
Agricultural bankers reported a 22 percent increase in farmland values in the central Corn Belt during 2021, and they expect values to continue to rise in the opening months of this year, said the Chicago Federal Reserve Bank on Thursday.
Farmland in Iowa is worth an average $9,751 an acre – the highest value since Iowa State University began the annual survey in 1941. Values skyrocketed by 29 percent this year, fueled by high commodity prices, better than expected crop yields and large pandemic relief payments, said associate professor Wendong Zhang.
Despite the disruptions of the pandemic, U.S. farm income, a broad measure of profits, will be the highest since 2013, thanks to strong corn, soybean, wheat, broiler, cattle, and hog prices this year, said the USDA on Wednesday. "It is primarily a price story," said USDA economist Carrie Litkowski.
High commodity prices and low interest rates fueled a sharp 15 percent increase in the value of cropland in the Midwest and Plains in the third quarter, according to surveys of ag bankers by four regional Federal Reserve banks. "Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong," said a summary of the surveys.
Fueled by strong commodity prices and continued pandemic assistance, farmland values are skyrocketing, up by 14 percent in the central Midwest and by 10 percent in the central Plains, said the Federal Reserve banks in Chicago and Kansas City on Thursday.
The Biden administration could "impose a significant financial burden" on farm families with its proposal for stricter application of capital gains taxes, said House Agriculture chairman David Scott on Wednesday. Scott also said any increase in estate taxes "for those taking over farmland is untenable."
With cash in their wallets, farmers are joining a throng of bidders that includes investors to drive up prices for farmland, said the largest U.S. farm management and real estate company on Tuesday. "Farmland sales prices are up by 5 to 15 perent in the past six months with most of the increase coming since the first of the year," said Randy Dickhut of Farmers National Co., based in Omaha.
Farmers in the Midwest and Plains are reaping a cash bonanza that has dramatically improved their finances a year after the pandemic pummeled commodity markets and prompted a record $46 billion in federal payments to agriculture, said three regional Federal Reserve banks on Thursday. (No paywall)
In agricultural lore, the absentee landlord is often a resented figure, an outsider who reaps an income from the labor of the farmer and takes away the profits rather than investing in the local community. The modern-day situation is more nuanced, says a USDA study which finds that, for the most part, "non-operating landlords" (NOLS) live fairly close to their property.
U.S. ethanol production plunged 13 percent last year due to the pandemic, costing the industry around $4 billion in sales. But it may recover fully by 2023, on the strength of larger exports and rising domestic use of higher blends of ethanol into gasoline, said the Food and Agricultural Policy Research Institute.
Heartened by sharp increases in commodity prices, farmers and ranchers across the Midwest and Plains are paying off bank loans and opening their wallets for big-ticket purchases, said a report from the Federal Reserve on Wednesday.
The coronavirus pandemic may be the defining event of 2020, driving the United States into a recession and pummeling commodity prices, but cropland values in the Farm Belt have been relatively unaffected — stable to slightly softer, said the USDA on Thursday.
Farm managers, land brokers, appraisers, and other professionals attribute a modest decline in Indiana farmland values in the first half of the year, a trend expected to continue into the winter, to disruptions accompanying the coronavirus, said Purdue University on Thursday. (No paywall)