Farmland has proven to be resilient despite inflationary pressures, even better than expected in cases. Some areas of the United States are producing new opportunities for landowners due to weather pattern changes. Others are dealing with obstacles associated with overproduction and insufficient global demand. Overall, long-term potential for land value appreciation looks positive. However, the next year could bring some uncertainty until borrowing costs begin to fall again. These are some of the trends laid out in the Peoples Company 2023 National Land Values Report.
“If you are looking solely at commodity prices and interest rates, you would expect that land prices would have some pressure on them in 2023, heading into 2024,” Peoples Company President Steve Bruere said as he reflected on the findings of the report.
But land values increased 12% nationally. “There are no forced sales. There’s no leverage against prices to come down,” Bruere said as he praised the strength of farmland values and ability to overcome challenges.
Some regions will adjust in 2024, Bruere believes. Some California nut producers who have dealt with oversupply may sell their land. “That means additional opportunities for buyers to enter the market,” he said.
But, overall, Bruere thinks it’s more likely land values maintain value in 2024, rather than decline.
“U.S. farmland markets have again demonstrated incredible resilience and stability through much of 2023 with continued strength in prices, but with signs of tapering trajectories compared to the previous two years,” Bruce Sherrick, professor and director of the TIAA Center for Farmland Research at the University of Illinois, began the overview of this comprehensive look at farmland factors.
Sherrick continued, “Transactional volumes have slowed over the majority of the U.S. and major grain commodity prices have retreated a bit from their recent strong levels with rebuilt grains stocks and stabilized demand, but crop insurance and other forms of support performed as expected providing a secure base against which longer term planning is possible; and longer-term prospects for income remain remarkably positive as well due to new and expanded demand prospects.”
Balance sheets for farmers are still “incredibly strong,” Sherrick notes, following numerous federal stimulus efforts and strong demand by monetary expansion.
Part of the uniqueness of the Peoples Company National Land Values Report is that it breaks down the 11 different regions across the country, details value appreciation and reveals top crop performances and challenges in that area.
Here is what the National Land Values Report found in each of the 11 regions, along with the strengths and challenges for that part of the country.
PACIFIC WEST— California is this region. Its size and importance to the agricultural economy merit its place as its own region. The state contains the most valuable farmland in the U.S. with average prices nearly $16,000. It produces 10% of the nation’s agricultural products.
Top crops: almonds, artichokes, celery, figs, garlic, grapes/raisins, kiwifruit, melons/honeydew, nectarines, olives, pistachios, peaches, other stonefruit, plums/prunes and walnuts.
Challenges: Oversupply of almonds and wine grapes, unreliable water supply.
PACIFIC NORTHWEST (Washington, Oregon)– Exceptionally attractive investment with low annual risk.
Top crops: Washington is the top U.S. producer of blueberries, hops, pears, and sweet cherries. Oregon is a major wine grape and berry production region and has a very strong dairy sector as well.
Challenges: Labor issues, adjusting to new laws related to overtime and temporary worker treatment
DELTA (Arkansas, Mississippi, and Louisiana) -- Plentiful rainfall, as well as groundwater resources that are well-suited for irrigation.
Top crops: Arkansas ranks first in the U.S. in rice production, producing nearly 50% of the nation’s rice. Mississippi is strong with corn, cotton, cattle/calves and catfish. Louisiana relies on poultry and sugarcane.
Challenges: Higher weather risks, along with fewer bidders and sellers for farmland.
LAKE STATES (Michigan, Minnesota and Wisconsin) –- Bodies of water allow numerous microclimates.
Top crops: Michigan has apples, stone fruit, berry/cherry production and growing wine grapes. Wisconsin has dairy (25% of the nation’s cheese production), cranberries and ginseng. Minnesota has corn and soybeans.
Challenges: Sales volumes have substantially decreased, and sellers appear more cautious about market timing.
SOUTHEAST (Florida, Georgia, Alabama, South Carolina, North Carolina) – The region enjoys a warmer climate, flatter lands in general and good water availability.
Top crops: Florida produces large amounts of fresh tomatoes, fresh sweet corn, watermelon and sugarcane. Georgia excels in broilers and peanuts. North Carolina provides tobacco, sweet potatoes, poultry & eggs, cucumbers and bell peppers. South Carolina offers timber, corn, cotton, hay, soybeans peanuts. Alabama stands out with corn, cotton and peanuts.
Challenges: Severe weather and flooding, inadequate access to farm labor and competition with residential uses for growing populations.
NORTHERN PLAINS (Kansas, Nebraska, North Dakota, South Dakota) --The region has rapidly appreciating values and strong income production. Warmer temperatures and reduced frost helped increased corn production in the region.
Top crops: North Dakota’s best include edible beans and canola. South Dakota produces corn and soybeans. Nebraska has cattle and calves, corn and soybeans. Kansas focuses on sunflowers, beef, cattle and wheat corn.
Challenges: Nebraska has higher agricultural property tax burdens in the region. All four states have anti-corporate farming restrictions that limit the degree to which institutional investors can own farmland. Water issues will continue to be critical issues to manage, but emerging demands for greener energy sources from wind and solar also favor this region in the long term.
SOUTHERN PLAINS (Texas, Oklahoma) – This is a strong oil and gas production region with significant energy conversion potential in wind and solar.
Top crops: Texas is number one in the country in beef production and the broiler industry is expanding. Oklahoma also produces a lot of beef, along with red winter wheat.
Challenges: The area is prone to periodic droughts. Water access and cost remain key issues.
CORN BELT (Iowa, Illinois, Indiana, Ohio, Missouri) – This is the region of row crop dominance. All five states are in the top 10 for corn and soybean production with Iowa and Illinois leading the way.
High quality farmland here is the “gold standard” for agricultural investments.
Challenges: Transactional volumes have slowed considerably in later parts of 2023. That brings caution about sales volume returning in 2024.
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