Despite the numerous challenges facing farmland owners including input prices, inflation, rising interest rates and declining commodity markets, the newest report from Farmers National Company (FNC) shows that the U.S. Midwest farmland market is maintaining value increases in the new year, despite the increase no longer being as sharp as in previous years.
FNC sale results that the high values initially driven by strong commodity markets have been maintained. This is based on sale data from the last six months, which covered nearly 700 transactions across the Midwest, accounting for $600 million dollars of sales volumes. Buyer demand remains strong for good quality cropland across the Midwest, while supply remains limited.
“These factors further play into the dynamics of the supply/demand scenario and remain a large factor in supporting current values in early 2024,” said Paul Schadegg, SVP, real estate operations for FNC in a statement.
Nearly 80 percent of transactions are from local farmers and operators. For farm owners and operators, FNC notes that they are typically interested in land that will fit well into their operation, is adjacent to other owned land or has historical ties. Land investors are looking for diversification, ROI or potential hedge against inflation. However, available cash has played a significant role in how readily buyers can bid at land sales.
“Current market operator’s equity positions have narrowed over the past year and lending has increased as outlined in the most recent Ag Credit Survey from the Federal Reserve Bank of Kansas City,” said Schadegg.
An increase of lending has resulted in an increase of interest, which FNC warns will result in lower net farm income in the coming year.b Commodity markets and input costs will continue to impact land values in the short term, but easing interest rates and reduced inflation across the U.S. will provide some relief. Uncertainty remains regarding geopolitical conflicts and political processes in the U.S.
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