There are more motivated land buyers in today’s market than there are willing sellers, according to Farmers National Company (FNC).
Despite the pressures created by lower net farm income, declining commodity markets, higher interest rates and increased input costs, land values have remained quite stable across the Midwest. While most university and industry land value reports published at year’s end reflect a flat or slight downward trend compared to production expenses, the stability in those values reveals the resiliency of the land market and its ability to maintain the high values set over the past five years.
“There are many factors for buyer motivation, but much of it can be explained by mindset translating to demand,” says Paul Schadegg, FNC senior vice president of real estate operations. “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.”
Considering the average age of today’s farmers, most have experienced the rise and fall of farm cycles and, along with it, the long-term appreciation of land value. They fully understand what an exceptional value land presents as an asset to their farm operation and investment asset, Schadegg notes.
“We anticipate operating farmers will continue to be the primary land buyer as we move into 2025. Changes in the ag economy will determine if the percentage moves up or down,” he adds.
Land investors make up the second largest segment of ag land buyers, he notes. Investors include individuals, groups and land investment funds. Schadegg says this group’s mindset is business oriented.
“There is virtually no emotional motivation, as buying decisions are based on return on investment or anticipated appreciation of land value. The motivation lies in expanding the portfolio, opportunities in productive regions and improving ROIs in declining land markets. Many land investors have not experienced the rise and fall of agriculture cycles but fully appreciate the long-term value of land. As pressures on the ag economy increase, investors stand ready to bid on land that fits their investment criteria,” he comments.
Across the industry, land listings are down, on average, 25% from the active and accelerating value market of 2020-2023. The principle of supply and demand fits into the current land market, as many landowners understand the long-term appreciation of land value while providing an annual return on that investment. Schadegg notes the result of this thinking is to retain ownership, further reducing the amount of land offered for sale.
“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,” he adds.
FNC has experienced an active fall selling season, marketing $223 million of land value for clients across the Midwest in the past three months. It conducted 123 sales through public auction methods. Real estate activity moving into the first quarter of 2025 remains brisk, with an above-average level of auctions and traditional listings being negotiated.
“Optimism remains moving into 2025, and with positive signals for the ag economy, opportunity will exist for those involved in agriculture production,” Schadegg states.
REGIONAL LAND VALUE REPORT
East Region: Indiana, Ohio, Michigan, Kentucky
Most areas in the eastern region have seen a continued decrease in land for sale in the second half of 2024, compared to the previous three years, which were very active, says Jay VanGorden, area sales manager.
“Several-year lows in commodity markets have led to less farmer buyer interest. In addition, rainfall was very spotty in the Eastern Corn Belt, with many areas seeing lower-than-average yields. However, some areas did receive excellent yields if rainfall happened to hit a localized area,” VanGorden observes.
“Even with these conditions, farmers and investor buyers are still looking to purchase land,” he notes. “With less land inventory for sale, land values have seen minimal price drops for highly tillable and quality soil-type farms in most areas. Farms with lower-quality soils, lower tillable percentages and poorer drainage have dropped off more significantly. As always in areas nearer high population areas and urban development, land values can be higher for replacement properties when land is sold for development,” VanGorden adds.
East-Central Region: Illinois, Wisconsin
Land sale values are more localized than ever and have increased slightly in most territories in this area, according to Nate Zimmer, area sales manager.
“Many farms are still being sold at historically strong levels; however, record-breaking sales aren’t as dominant as a few years ago. We’ve seen several auction ‘no-sales’ the past few months, which is a sign seller and buyer expectations are not aligning as previously,” Zimmer notes. “The real estate market has always been about location; however, the location factor and the strength of possible buyers nearby means more than ever.
“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 auction. The current sentiment of most brokers in our area is that 2025 will bring about a tendency for land values to stabilize or decrease some. Farmer profitability looks to be down in 2025, and their profit margins directly affect land values as farmers are still the primary buyers of land,” Zimmer adds.
Central Region: Iowa and Southern Minnesota
Throughout 2024, average land values gradually declined from the record highs reached in 2021 and 2022, dropping 5% to 10% in the past year in Iowa and southern Minnesota. Buyer demand has weakened for poorly drained and lower-quality farms, while high-quality, highly tillable farms have maintained steady interest. This sustained demand has sometimes driven auction prices for premium farmland to levels comparable to those seen two years ago, according to Thomas Schutter, area sales manager.
“With the decline in buyer demand, alternative sale methods have become more common, particularly for lower-quality farms. While higher-quality farms are still predominantly sold through auctions, there has been a noticeable increase in the use of traditional listings and sealed bids for marketing farmland in some areas,” Schutter says.
South-Central Region: Kansas, Eastern Colorado, Western Missouri
According to Steve Morgan, area sales manager, agricultural profitability continues to be the main driver of the land market in this area.
“Land prices in southwestern Kansas have seen retracement, mainly irrigated land, due to the declining water availability in the area and the uncertainty surrounding GMD3’s future implementations of reducing allotments across the region. Eastern Colorado land prices have remained strong/stable with no marketable price decline,” Morgan says.
“Sales for top quality irrigated cropland and pasture remain strong with active buyer interest across the northwestern tier of Kansas counties. Central and eastern Kansas is seeing high demand for pasture and rec land achieving top dollar. Crop land is highly dependent on location and local competition. We have maybe seen a price decrease on lower-quality properties in south-central Nebraska, but the high-quality properties have not seen the same decrease,” he says.
Morgan adds well-maintained, high-quality cropland in the western half of Missouri has not faltered either. Average cropland has been retraced in a 5% to 10% range. He notes recreation properties are still highly desirable, whether used in mixed use with crop acres or as pure recreation properties.
Western Region: Western Nebraska, Northwest Kansas, Northeastern Colorado
As the land market in central and western Nebraska, northwest Kansas, and northeast Colorado has settled over the past year, Cole Nickerson, area sales manager, says two consistent themes have emerged in recent sales.
“Neighborhood demand and land quality are the primary drivers in our area land market. Land values have remained high in regions with strong cattle production, driven by record beef prices. High-quality irrigated and productive dryland farms continue to command strong prices, reflecting recent trends. Quality grassland with good fences, ample water, and easy access have also maintained elevated prices,” Nickerson says.
“However, there has been a slight decline in values for land with productivity or access issues. Economic challenges in the corn and soybean markets have made farmland more difficult to sell in areas dominated by row crop production,” he adds.
West-Central Region: Eastern Nebraska and Western Iowa
Land values in eastern Nebraska and western Iowa, for the most part, have stayed steady, especially for highly productive farms or areas where there has been a limited supply of properties for sale, says Chanda Scheuring, area sales manager.
“But, as the agriculture economy faces less readily available cash compared to prior years, the buyer pool has shrunk. This has led to properties with lower tillable, or less productive, acres being the first to feel the pressure of higher interest rates and tighter profit margins. Over the past six months to a year, these types of property have seen a slight reduction in value (about 5% to 10%) from the recent market peaks,” Scheuring says.
“Buyers, both local farmers and investors, are still interested in making farm purchases; they’ve just become more selective in which properties to add to their portfolio and the price they are willing to pay,” she adds.
Northern Regions: Dakotas and Western Minnesota
Troy Swee, area sales manager, notes land values in the northern region are holding fairly steady despite the reduction in commodity prices and higher-than-normal interest rates.
“With that being said, if I chose one word to describe the overall real estate market across South Dakota, North Dakota, and Minnesota, I would choose ‘chaotic.’ Land values remain very strong in areas where not much land has sold and producers had an above-average crop in 2024. However, in areas with less investor interest and where several farms have already been sold, land values appear to be down 10% to 15%,” Swee states.
“We have also seen substantially fewer bidders at our simulcast and online auctions. We often see about half the number of bidders as we did in the fall of 2022. With this shift in buyer demand, we have seen an increase in traditional listings and bid sales in some areas,” Swee adds.