Farmland value represents the most important component of an agricultural producer’s net worth and asset value, accounting for more than 80% of the average farm balance sheet, according to a USDA survey. Therefore, monitoring farmland value per acre is crucial, as it affects farmers’ and ranchers’ ability to secure additional funding from lending institutions, given that these lands are used as collateral.
Farmland Value Increase in the Short-Term
In the last couple of years, despite interest rate hikes that have increased the cost of funding for farmland purchases, the demand for agricultural land and farm profitability have remained strong. Strong demand, coupled with a limited supply of agricultural land, average agricultural land prices soared by 7.7% in 2023, according to the USDA.
Recent record-high farmland value increases in the Corn Belt region have sparked discussions about the seemingly slower increase in the southern region. While it is true that some Corn Belt states experienced 30% to 40% increases in farmland values over the past couple of years, examinations of broader regional changes and long-term trends present a different picture.
According to the USDA, since 2021, cropland values in the Southeast (Alabama, Florida, Georgia, South Carolina) and the Southern Plains (Texas and Oklahoma) have increased by 20% and 22%, respectively, making these increases comparable to those in the Corn Belt states (22%). Delta states (Arkansas, Louisiana, and Mississippi) experienced a 12% increase, falling short of other regions. Increases in pastureland values were more consistent across regions. Delta and Southeast states saw increases of 12% and 13% in pastureland values, similar to the 14% increase in the Corn Belt states. In the Southern Plains, pastureland values soared in 2023, reaching a 20% increase.
Farmland Value Increase in the Long-Term
While some southern states may seem to lag behind in growth rates in the short term, long-term trends show robust growth for these states. Between 2014 and 2023, the Southern Plains states experienced the highest increase in cropland value (50%), while the Southeast and Delta states each saw a 40% increase. Cropland values in the Corn Belt states increased by 18% during the same period. Looking at pastureland, the dollar value per acre in the Delta states increased by 39%, followed by the Southern Plains (34%) and the Southeast (30%). Pastureland value in Corn Belt increased by 22% for the same period.
Moving Forward
While it is true that farmland value increases have been sluggish for some states in the South, production specialties and long-term trends should not be overlooked.
For 2024, it is generally expected that farm profitability will decrease, especially for crop producers, adding downward pressure on cropland values along with high farmland loan interest rates. However, due to the limited supply of farmland and strong demand for agricultural land, it is expected that farmland values will remain steady or experience a slight increase.
Kim, Kevin. “Farmland Value Trends in South.” Southern Ag Today 4(24.3). June 12, 2024. Permalink
