The biggest question in farmland markets has been “how much higher?” There are many datasets and reports throughout the year – such as the recent Purdue survey – but the USDA’s data is unique as it provides a method to make comparisons across regions and states.
National Farmland Data
Figure 1 shows the value of the U.S. cropland since 2000. Over the 22-year period, values increased from $1,460 to $5,050 per acre. This is equal to an average annual rate of increase of 5.5%. More recently, these values increased by 14.3% from 2021 to 2022 alone.
State-level Farmland Data: 2020 to 2022
For most states, the current boom got underway in 2020 when commodity prices, farm profitability, and capitalization rates all turned favorable. While year-over-year changes are interesting, it’s the multiple-year changes that are generally worth monitoring.
Figure 2 shows the state-level changes in cropland values since 2020. Posting a 42% increase in just two years, Kansas cropland values have increased the most. Large increases were also observed throughout Northern Great Plains and the Corn Belt regions.
The Southwest and Delta states observed the smallest increase, with cropland values rising by less than 10% in four states. That said, each state with data reported has a positive change.
State-level Farmland Data: 2010 to 2022
For more perspective, Figure 3 shows valuation changes since 2010. Consistent with Figure 2, the largest increases in value occurred in the Northern Plains and Western Corn Belt. With this time frame, however, the magnitudes are considerably different.
Since 2010, cropland value has increased the most in North Dakota (+180%). As a reminder, a 100% change would mean values doubled. These data reveal that, since 2010, values have doubled in seven states.
Similarly, this map also shows very small increases in cropland values in the Southwest and Southeast. In some cases, a majority of gains over the last 12 years occurred in the last two years. Arizona, for example, posted cropland values up 9% since 2020 (Figure 2) but only up 8% since 2010 (Figure 3). In this case, cropland values declined from 2010 to 2020, before recovering in the last two years.
These data act as an important reminder of how regional effects – including the commodities grown – are critical. In other words, national trends don’t always apply uniformly across all states or regions.
Lastly, Figure 4 shows the data in Figure 3 shown in annualized terms. The Rule of 72 reminds us that a compounding growth rate of 7.2% would result in a doubling every 10 years. Four states – North Dakota, South Dakota, Nebraska, and Kansas – all observed an annualized rate of more than 7.2% since 2010.
It’s worth noting that some states (North Dakota) saw values increase at an annual rate larger than 12 years of total gains in Arizona and New Mexico.
Wrapping It up
While farmland values have turned sharply higher in recent years, it’s important to consider the latest data in the context of recent trends. Specifically, farmland turned sharply higher in 2021, and, in many regions, has been on a strong run since 2010.
A second consideration is that the gains have not been uniform across the country. Even within regions that produce corn and soybeans, the magnitude of the “boom” has varied. For instance, the gains since 2010 in Indiana (+4.7% annually) are considerably different than in Iowa (5.9%) or Nebraska (+7.2%).
Where will farmland values go from here? While it’s unclear how long farm profitability will remain strong and for how long capitalization rates will remain low, it’s important to recognize both have been favorable to valuations, especially since 2020. We will dive into these issues in more detail in future articles.
For those still curious, be sure to check out the latest farmland articles on AEI Premium. You can also consider these farmland-related questions using our decision-making tool:
- What do you think is the probability of top-quality Indiana farmland values increasing by more than 15% in 2023, per the June 2023 Purdue Survey?
- What do you think is the probability of top-quality Indiana cash rent increasing by more than 15% in 2023, per the June 2023 Purdue Survey?