USDA’s recent Land Values Report shows a strengthening in the prices of U.S. farmland. According to a Farm Bureau economist, prices are reaching record levels.
According to Danny Munch, “The Department of Agriculture’s Land Values Report shows that agriculture real estate values are up 5%, or an average of $200 an acre to a record of $4,170 an acre over 2023. This includes cropland being up 4.7% to $5,570 an acre, and pastureland being up 5.2% to $1,830 an acre over last year. How much farmers are paying for rent for cropland has also reached record levels, with cash rent at 3.2% over last year.”
Munch says that land values and cash rents are actually two key indicators that can be used to measure the health of the farm economy.
“There’s two sides of the story here. The first being that land values continue to increase, which means land, which is farmers’ number one asset, has increased in value. This puts farmers in a stronger financial position when it comes to acquiring loans,” he states. “When land values increases start to slow, though, like we’re seeing, the equity growth starts to slow as well. So, banks might consider farmers high risk if their asset value is stagnating. On the cash rent side, higher cash rent is just another negative on the balance sheet. So, seeing record levels here means breaking even is even harder.”
Munch says that if production expenses begin to outpace the growth of land values, farmers could find themselves in a challenging situation where they may be unable to pay for inputs and make any form of profit.