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Book value of farmland in the United States continues to grow

The average value of US farmland has risen by about 14% this year, although higher commodity prices and higher inflation have led to soaring production costs.

It is the second consecutive year that farmers in the United States have seen a significant increase in the value of their land. The value now averages $5,050 an acre, according to a recent USDA survey.

Professor Bruce Sherrick of the University of Illinois says he isn't surprised by the surge, even saying some of the new NASS results are probably too conservative. There are, however, major differences by state.

The average in Iowa is now $9,400, 21.4% more than a year ago. The largest year-over-year increase for cropland is in Kansas, with a 25.2% increase from last year.

Prices started rising as early as last year, according to the researchers, farmers had more money to spend, interest rates fell and people started buying up land they might not have bought otherwise, Professor Sherrick told US agricultural media. 

Not only fields and farmland have increased in value; all agricultural property categories also rose. Farm real estate, including buildings, costs an average of $3,800 per acre, an increase of 12.4% from a year ago. And the average value of pasture is $1,650 per acre, an increase of 11.5%.

According to an economist with the American Farm Bureau Federation, the rise in values is a direct indicator of the health of the US agricultural economy, but there are also complicating factors.

Rising land values are good news for owners, but they also translate into higher rents. For U.S. farmers who are just starting out or relying on rent or lease to make ends meet, these increases can present an insurmountable barrier.

It is somewhat less clear how the value of cropland will fare in the shorter term. Containing inflation has become a priority for the Biden administration and the Federal Reserve (Central Bank) is expected to continue raising interest rates.

That could curb rising farmland values, but probably not too seriously, said Kevin McNew, chief economist for the Farmers Business Network. He says he expects farmland values to continue to rise over the next 6-12 months.


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