Written by: Brooke Bouma Kohlsdorf
Edited by: Dave Price
As we ring in 2025, we see agricultural land values across the Midwest that could face a period of recalibration after several years of growth, according to experts who study trends in the industry.
The landscape for land prices, particularly in ag-heavy states like Iowa and Illinois, is shaped by a mix of economic pressures like higher interest rates, lower commodity prices, and weakening agricultural credit conditions. Despite these challenges, several factors can still provide support for the market.
The question remains: how will the agricultural real estate market balance these influences in the coming year? The authors of three publications weighed in on what could happen in the new year.
Iowa's Land Market: A Minor Dip After Years of Growth
In Iowa, farmland values have seen a notable shift, a foundational change compared to recent years. The Iowa State University Land Value Survey for 2024 was released in mid-December. It reported a 3.1% drop in farmland prices, bringing the average price per acre down to $11,467.
This decrease marks the end of a five-year trend of rising land prices, which included dramatic annual increases of 29% and 17% in prior years. While the nominal value is now lower than 2023, it remains above 2022 levels. That reflects the lingering strength in the market despite the correction.
According to the report, farmland values in Iowa may see further declines in 2025—projected to be around 3%. The decline in land values can be attributed to a combination of factors: falling commodity prices, persistently high interest rates, and elevated input costs, all of which have placed pressure on farm profitability.
Dr. Rabail Chandio – Iowa State University Assistant Professor of Economics and Extension Economist who led the survey -- noted that although the Federal Reserve began cutting interest rates toward the end of 2024, the effects of previous rate hikes are still weighing heavily on the market.
“It takes time—sometimes up to a decade—for interest rate changes to fully ripple through the land market. And although rates recently dropped, with another cut on the horizon, it’s not enough yet to ease the pressure from those earlier hikes as we move into 2025,” Chandio said.
“If rates fall within a couple of years, we could see farmland values beginning to recover sooner. But if rate cuts take longer, we may see declines persist for another year or two,” she said.
RELATED: Review the 2024 ISU Land Value Survey here. The survey also includes a video from Dr. Rabail Chandio in which she breaks down the findings and explains what to watch for the future.
Illinois: The Resilience of Farmland
The agricultural land market for Iowa’s neighbor to the east, Illinois, reflects a similar story. The University of Illinois Department of Agriculture’s Nick Paulson, Gary Schnitkey, and Carl Zulauf are forecasting a potential decline of around 3% in 2025.
“A 3% decline would be in line with observed adjustments since the 1980s as well as expectations from professional farm managers surveyed in 2024,” they wrote in the survey’s summary.
The three added that the market is likely to see smaller fluctuations in value than those experienced during the 1980’s farm crisis as farmers’ financial resilience remains strong following several years of robust income.
However, the ongoing rise in interest rates presents a unique challenge. Paulson, Schnitkey, and Zulauf say higher financing costs and more attractive returns from alternative investments—such as government securities—reduce the demand for farmland and increase the costs of owning it.
Yet, despite the negative pressures, Illinois farmland has historically been resilient. Since 1988, land values have rarely seen sharp declines. And even when they have, the drops have been moderate compared to the extreme fluctuations seen in the 1980s.
Paulson, Schnitkey, and Zulauf offer these final words as farmers and landowners look ahead to the potential challenges of 2025:
”Multiple arguments for continued strength in farmland values could also be made. First, farmland remains an attractive asset with total returns (current plus capital returns) that are competitive with other asset classes, particularly over longer holding periods.
Second, turnover rates for farmland are expected to continue to remain low meaning that purchase opportunities are scarce. Finally, as farm operations continue to expand and alternative uses for farmland continue to grow, demand for an asset in fixed or declining supply will continue to remain strong.”
RELATED: Here is the Outlook for Farmland Values in 2025 for Illinois, which includes data for cash rents and land values.
Kansas City Reserve Bank's Agricultural Credit Conditions: Pressure Mounts
The Federal Reserve Bank of Kansas City puts out a quarterly Survey of Agricultural Credit Conditions to provide current indicators of the financial performance of Tenth District agriculture. The accumulated results also help trace longer term trends.
The district includes western Missouri, Nebraska, Kansas, Oklahoma, Wyoming, Colorado, and northern New Mexico. The latest results show agricultural credit conditions have been gradually deteriorating since the third quarter of 2024. According to Francisco Scott and Ty Kreitman, the two economists who interpret and assemble the information, the survey highlights a sharp decline in farm income, slower loan repayment, and an increase in problem loans.
Those three factors could impact land values this year. The authors wrote, “This has placed significant pressure on farmers, especially in crop-heavy regions where weak crop prices have further strained profit margins. As working capital shrinks, the demand for loans has surged, and asset liquidation has become more common.”
Despite these challenges, Scott and Kreitman believe farm real estate values in the region have remained firm, providing a glimmer of stability. But with the farm sector's outlook remaining uncertain due to weak crop prices, the agricultural economy faces continued strain.
The authors believe that since profits will likely drop for crop producers, their financial strain is likely to persist in 2025. That could lead to increased demand for credit and potentially more challenges in securing financing for land purchases.
