Central Corn Belt farmland values saw a 4% annual gain in the first quarter of 2024, according to the Federal Reserve Bank of Chicago. That increase is noted in the bank’s quarterly survey of ag bankers in its service area of Illinois, Indiana, Iowa, lower Michigan and Wisconsin.
The 4% annual increase is the smallest since the third quarter of 2020, reports the survey’s coordinator, David Oppedahl. He states: “District farmland values exhibited a continued deceleration in their growth in the first quarter of 2024. Agricultural land values increased 2% in the first quarter of this year from the fourth quarter of last year, matching their growth in the final quarter of 2023 from the third quarter. After being adjusted for inflation with the Personal Consumption Expenditures Price Index (PCEPI), the year-over-year gain in district farmland values for the first quarter of 2024 was just above 1%,” he states. It is also the 16th consecutive quarter of real year-over-year growth increases.
Demand to purchase farmland was lower in the three- to six-month period ending with March 2024 than in the same period a year earlier, he notes. “Plus, the amount of farmland for sale and the number of farms and the amount of acreage sold were down during the winter and early spring of 2024 compared with a year earlier.”
Looking at cash rental rates, he says average annual rates rose 2% in 2024, which is a “much slower rate than that of the previous three years.” A sizable majority of responding bankers (76%) forecast farmland values will be stable the second quarter of 2024, 7% expects them to be higher and 17% look for them to be lower, he says.
After adjusting for inflation with the PCEPI, district cash rental rates were down 1% in 2024 from the previous year. This small annual decrease in real cash rents follows three consecutive annual increases, he notes. In real terms, the index of farmland cash rental rates peaked in 2013. After decreasing slightly in 2024, the index of real cash rental rates is 34% below its level in 2013, he says.
By contrast, the index of real farmland values is 15% above its previous peak, which it reached in 2013 and then surpassed in 2022. “The implication seems to be that relatively stronger demand to own farmland than to lease it has kept farmland values moving higher, despite the falling earnings potential of farmland (represented by cash rental rates),” he comments.