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Land values signal seller’s market; soil quality can affect buyer interest: Report

Although numerous land value reports published in late 2024 indicate a flat or slightly downward trend compared to production expenses, some factors still point to a seller’s market.

According to the latest report by Farmers National Company (FNC), a Nebraska-based management and professional solutions provider for U.S. farms, despite various pressures on farms – lower net farm income, declining commodity markets, higher interest rates and increased input costs – land values have remained stable across the Midewest. That stability reveals the resiliency of the land market, says FNC, and with a larger number of motivated land buyers in today’s market, this could lead to strong demand.

“There are many factors for buyer motivation, but much of it can be explained by mindset translating to demand,” said Paul Schadegg, SVP of real estate operations at FNC in a statement. “Farm operators continue to be the primary buyers of ag land. Their mindset or motivation revolves around reinvesting in their farm enterprise, expanding operations, and utilizing today’s farm equipment fully. Location of land offered for sale also plays a large role in their decision making, as often this land has not changed hands for generations and once sold, may not be sold again.”

Schadegg added FNC expects operating farmers will continue to be the primary land buyer in the next year, although any forthcoming economic changes might alter the share that they represent. Land investors, including individuals, groups and investment funds, make up the second-largest segment of ag land buyers. There is “virtually no emotional motivation” with such groups, says Schadegg. He adds most U.S. farmers are old enough to have observed the various rises and falls in the farm economic cycle, and thus have a strong understanding and appreciation of the value of their land assets.

Land listings are currently down 25 percent, according to FNC’s dada, from the market rate between 2020 and 2023, which was considered to be a highly active and accelerating market. With supply down, that naturally puts demand high.

“Motivated buyers remain in the current land market both as farm operators and land investors ready to deploy available cash to further their operations or portfolios,” added Schadegg.

Over the latter half of 2024, FNC’s eastern region (Indiana, Ohio, Michigan and Kentucky) saw a continued decrease in land for sale compared to the previous three years, which were active on a regional scale similar to the national scale. Jay VanGorden, area sales manager for this region with FNC, says a number of factors including commodity market lows and lower-than-average yields thanks to spotty weather in the Eastern Corn Belt have led to less farmer buyer interest. However, despite these conditions, interest from farmers and investor buyers remains strong. “With less land inventory for sale, land values have seen minimal price drops for highly tillable and quality soil-type farms.”

Farms with less desirable qualities, including lower-quality soils and poor drainage, have dropped off’ “more significantly,” VanGorden added.

Such qualities also drove weaker demand for low-performing farms in the central region (Iowa, southern Minnesota). Such qualities separated the top performers, which at times drove auction prices to levels that compared to the peak several years ago, from the rest, although the region still saw drops from five to 10 percent overall from the peak.

Land sale values increased slightly in FNC’s east-central region (Illinois, Wisconsin). Farm values are still being sold at historically strong levels, although with fewer record-breaking sales than in the busy 2020-2023 period. Area sales manager Nate Zimmer added that when there are questions about the local buyer pool or overall farm quality, the method of sale is increasingly becoming the private treaty listing route, as opposed to public action.

The full regional report is available here.

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