People still want high-quality farmland despite high interest rates

Real estate experts are warning high interest rates are starting to affect farmland demand, saying the slowdown first showed up toward the end of last year.

“Now when we look at it and say, ‘Well, what’s changed?’ Interest rates are up and equity is not quite as strong as it was, commodities are still pretty strong, but then we look at inputs quite a bit higher. So, definitely some dynamics have changed, so I would anticipate that we’re going to continue to see some softening. I don’t know that we’re going to see anything dramatically,” said Paul Schadegg.

This comes after several states are working to pass legislation to limit foreign ag land ownership. Schadegg says for now, farmers are still the top buyers of U.S. farmland.

“But I think you’re going to see that dip a little bit, and it’s going to be taken up by the investors. Not a huge swing, but I think there are investors who see more opportunity in return on investment as that land value goes down, and commodity markets and cash rents are still pretty strong. That improves their position on the return, so that peaks their interest a little bit and maybe causes them to be a little more active in the market.”

Schadegg says despite all this, there is still strong demand for high-quality farmland. Last year, the National Ag Statistics Service showed a nearly 2-million acre decrease in U.S. farmland, leaving current totals at around 839 million acres.

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