The average value of American agricultural land has increased by about 14% this year, although higher production costs driven by more expensive raw materials and increased inflation have predominated.
This marks the second consecutive year that farmers in the United States have seen the value of their land rise significantly. The value now averages $5,050 per acre, according to a recent USDA overview.
Professor Bruce Sherrick from the University of Illinois says he is not surprised by the strong increase and even suggests that some of the new NASS results may be too conservative. However, there are large differences per state.
The average in Iowa is now $9,400, which is 21.4% higher than a year ago. The largest year-on-year increase for cropland is in Kansas, with a rise of 25.2% compared to last year.
According to the researchers, prices had already started to rise last year; farmers had more money to spend, interest rates fell, and people began purchasing land they might not have otherwise bought, professor Sherrick told American agricultural media.
Not only arable land and agricultural land values have increased; all agricultural real estate categories have also risen. Farm real estate, including buildings, costs an average of $3,800 per hectare, an increase of 12.4% compared to a year ago. The average value of pasture land is $1,650 per hectare, a rise of 11.5%.
According to an economist from the American Farm Bureau Federation, the rise in values is a direct indicator of the health of the American agricultural economy, but there are also complicating factors.
Rising land values are good news for owners, but they also translate into higher rental prices. For American farmers who are just starting out or who rely on renting or leasing to make ends meet, these increases can create an insurmountable hurdle.
It is somewhat less clear how the value of cropland will perform in the shorter term. Curbing inflation has become a priority for the Biden administration, and the Federal Reserve is expected to continue raising interest rates.
That could slow the rising agricultural land values, but probably not too severely, said Kevin McNew, Chief Economist of the Farmers Business Network. He expects the value of agricultural land to continue rising over the next 6-12 months.