Farmland values in the first half of 2022 benefitted from continued profitability in agriculture. Benchmark farmland values tracked by Frontier Farm Credit increased nearly 9% between January and July, extending gains in the real estate market that began with the 2020 harvest and rising grain prices.
Values are strong for high quality cropland, and stable to slightly higher for average to below-average cropland. Pasture values on the whole have held.
Eastern Kansas | Six-Month Change | One-Year Change | Five-Year Change | Ten-Year Change |
|---|---|---|---|---|
Kansas (7)* | 8.8% | 17.2% | 20.3% | 77.4% |
(*The parentheses indicate the number of benchmark farms tracked by Frontier Farm Credit.)
Agriculture, like other industries, is paying more to do business. Input costs, interest rates and inflation are squeezing margins. But high grain prices continue to provide opportunities for positive profit margins.
Some of the factors influencing commodity prices today, including unrest in Ukraine and dry growing condition in areas of South America, likely will carry into 2023 and support continued strength in commodity prices. Margins ultimately will depend on input costs and a producer’s ability to manage cost increases and supply chain disruptions.
Producers are leveraging the past few years of strong profits to buy land and grow their businesses. Interest in farmland also has picked up among buyers who are looking for safe, long-term alternatives to a stock market rocked by global uncertainty and volatility.
Both on-farm profits and demand for ground contribute to a real estate environment in which values remain strong for the foreseeable future. While this is good news for agriculture, it comes with a price.
Cash rents generally lag changes in real estate values, as well as profitability in the industry. Producers anticipate significant increases in cash rents this fall as landlords adjust rates to reflect record land values and consecutive years of strong profits.
Frontier Farm Credit tracks values on seven benchmark farms to identify trends in the farm real estate market. Its appraiser also follow every sale of agricultural ground in its territory. The average per-acre price in the second quarter was $7,419. While land auctions were up 45% compared to the same period in 2021, total sales were down nearly 70%.
