There are three “I” states that are vital to the Midwest agricultural markets: Indiana, Illinois, and Iowa (We don’t want to leave out the contributions, especially in potatoes and beef cattle, for the state outside the region: Idaho).
Bruce Sherrick has been following a different set of three “I’s” that have been challenging agriculture.
Interest rates
Inflation
Income
Although, he would later add a fourth “I” to this illustration.
“We’ve always said that the factors that affect farmland or any other real asset can be kind of summarized in income, inflation, and interest rates,” Dr. Sherrick -- Marjorie and Jerry Fruin Professor of Land Economics at the University of Illinois, Urbana-Champaign and Director of the TIAA Center for Farmland Research – told American Farmland Owner.
“Because we’ve come through two periods of time where the federal government has managed interest rates very actively, it was pretty easy to identify the causes and effects around that,” Sherrick said.
A fourth “I” is what Sherrick calls “increased uncertainty.” Farm incomes fell in 2023 and 2024 after surging in 2021 and 2022 following COVID-19 lockdowns in 2020. The economic climate in 2025 is challenging to predict as forecasters look at farm income projections.
Sherrick said, “The ability to identify forward expectations about income has gotten more complicated. But, yeah, I think the story this year is really, what do people think the future is going to hold in terms of a longer-term projection around income?”
He is in his 36th year at the university and has decades of experience following land trends. For nearly his entire career there, Sherrick could follow data from the National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Returns.
The numbers showed why interest in farmland has endured. Over that period, farmland averaged a 10.29% annual return, which outpaced the Dow Jones increase of 8% yearly.
RELATED: Dr. Bruce Sherrick wrote about historical gains in farmland values in this blog post.
Sherrick summarized the economic atmosphere’s impact on farmland values in 2024 like this:
“…the source of the aggregate decline was concentrated in commodity and row crop producers, and while partially offset by increases in livestock and dairy incomes, the income decline was absorbed in operations that are most directly tied to farmland values.
Producers with large shares of rented land bore the greatest effects, and in many cases drained off their balance sheet build-ups from the previous three years that had led to exceptionally strong financial capacity and which were very supportive of farmland prices.”
Sherrick also looked at uncertainty involving policies after Donald Trump returns to the White House. He wrote, “As we have learned, long term trade and export patterns can be dramatically altered by tariffs or trade renegotiations that could either expand access the growing demand for calories around the world, or perhaps revisit episodes that generated large government offset payments to agriculture instead.”
Sherrick included those insights as part of the Peoples Company National Land Values Report, the fifth annual production that provides a deep dive into farmland values, trends, and agricultural production strengths and weaknesses broken down into regions.
Peoples Company President Steve Bruere added, “Despite high interest rates and lower commodity prices, farmland performed exceptionally well this past year. The decline in land values has been less pronounced than expected, mainly due to limited leverage and a shortage of available inventory.”
Bruere also acknowledged some of the disruptions in the industry. “…there has been a reshuffling of capital, as investments in farmland, which were fueled by a long period of low interest rates, have begun to shift back into more traditional fixed-income assets. Farmland remains positively correlated to inflation, but permanent crop assets, which have high labor costs and depreciation, have faced greater challenges. As a result, many non-operating landowners have exited these assets due to ongoing profitability struggles.”
Sherrick said that farmland has proven its strength over the past two years even though forces have pulled down some values. “Farmland markets don't tend to react as quickly as, say, …the received wisdom models, you would apply to, say equities or traded stocks, or even to fixed income.”
“Partly because it's a much longer duration hold. And it's a forward looking.”
