BAM Key Details:

  • Aggressive land buyers are driving up land values for high-quality cropland in the U.S.
  • According to a recent report from the Kansas City Federal Reserve, public/online auctions of farmland have set new records and increased values by 20-34%
  • With more landowners relying on Farmers National Company for marketing and other services, they’ve seen a new record sales volume for 2022

Competition for high-quality cropland has dominated the land market, building on a momentum that started in 2021 and accelerated in 2022. 

That competition among aggressive land buyers resulted in both record sales for landowners and an overall surge in land values across the U.S. 

Aggressive buyers are driving up the real market value of specific areas through public/online land auctions, with final results setting records in several states and increasing year-to-year land values by 20-34% across Corn Belt states.

That’s according to the most recent report from the Kansas City Federal Reserve. 

In most cases, landowners selling properties in these areas are experiencing never-before-seen values for their farmland. 

What role does Farmers National Company play in all this?

As the leading landowner services provider in the country, Farmers National Company manages over 5,000 farms and ranches in 30 states, totaling over 2 million acres of land. 

Over the past five years, the company has sold 4,796 properties (1,740 by auction); and over the past 10 years, it’s sold over $6.03 billion in real estate. 

Other services provided by Farmers National Company include—

  • Energy management
  • Appraisals
  • Insurance
  • Hunting Lease Network
  • Forest management
  • FNC Ag Stock
  • Consultations 
  • Collateral inspections. 

Landowners across the U.S. turn to Farmers National Company for help marketing their farmland assets, resulting in a new record sales volume for 2022: $766 million. 

The majority of those sales happened through competitive auctions (76%), with upticks in both total transactions and the number of acres sold. 

The previous sales record set in 2021 was $750 million. 

What we are seeing is a true supply/demand scenario. There are simply more buyers willing to bid on the limited amount of land coming to the market. Current commodity markets and strong cash rents provide buyers with the necessary returns to meet their investment criteria while giving them the opportunity to expand operations or add land to their investment portfolio. Our anticipation is that these values will remain strong coming into the new year with continued strength in the ag economy although we may see less and less of the record sales.

Paul Schadegg

Senior Vice President of Real Estate Operations for Farmers National Company

Who are the buyers?

The land buyer in these transactions—75% of the time—is the traditional local farmer-operator. 

That being said, land investors have also been active bidders at most sales auctions, often setting the floor on values or driving the values higher. 

We also expect this trend to continue as many investors see the long-term value of farmland, the opportunity to diversify investments and the value of land as a hedge against rising inflation.

Paul Schadegg

Senior Vice President of Real Estate Operations for Farmers National Company

Factors driving the market vs. those that could disrupt it

Commodity markets will continue as the primary driver of land values. With the current supply/demand scenario, the outlook for land values in 2023 remains strong. 

That said, the folks at Farmers National Company remain cautious as the Fed raises interest rates and inflation continues to affect purchasing power

Both factors have the potential to disrupt the trend of rising land values by decreasing net farm income and diminishing operator equity. 

Opportunity exists for both buyers and sellers, but it depends on the ability of the agriculture economy to stabilize—just as the broader economy seeks to balance itself—or to grow.

Top takeaways for real estate agents

If you’re involved in the sale or purchase of farmland, there’s good news in these land value trends for both buyers and sellers—especially if values continue to grow. 

Even if you don’t specialize in auctions or in farmland, if you live in an area with plenty of both, it makes sense to get familiar with them and explore the possibility of adding auction-related or farmland-related services to your repertoire. 

More and more brokers are increasing their participation in auctions—and not just for agricultural properties. Given that, it only makes sense to learn more about the frequency of auctions in your area and which (and how many) agents are most frequently involved in them.