Land prices have taken another jump after remaining steady to start 2022. The latest land values report from Farmers National Company provides an update on current land value trends and a forecast for where prices are headed.

Concerns about tax law changes increased the amount of land that came on the market to wrap up 2021. Demand from farmers and investors remained strong despite the influx in supply, driving land prices up significantly. Sales slowed down to normal in early 2022, but demand remained strong. 

“Prices for good quality cropland are up 20 percent in some areas since the first of the year," says Randy Dickhut, senior vice president for Farmers National Company. "Good land that was selling for around $16,000 last fall sold for $19,000 to $21,500 per acre at company auctions in March. This increase in prices is on top of a 15% to 30% jump in value across most Grain Belt states in 2021.”

Despite higher grain prices, farmers are feeling the crunch as production costs have also skyrocketed. Inflation and stability concerns have come to the forefront when making investment decisions, the report explains. Still, farmers continue to bid aggressively at farmland auctions as the land provides a safe long-term inflation hedging investment. 

The agriculture industry, including farmers, faces challenges regarding input supplies and world trade. The pressure is on for the U.S. to ramp up production following Russia's invasion of Ukraine, emphasizing the need for good cropland. 

The future of land prices

The Fed is in the process of raising interest rates to combat inflation. In return, land mortgage costs will increase, negatively impacting land prices. How far and how soon rates go up will determine the extent of the interest rate influence.

Anything can change at a moment’s notice with the weather, commodity markets, world events and government actions. All will affect agriculture and therefore, the price of farmland, Dickhut notes.

The supply of land for sale and how demand holds up over the next months will also play a role in driving land prices. “With current land prices at heightened levels, most of the supporting factors remain in place at this time to keep values steady to firmer for the next six months. This outlook could be altered at any moment due to unexpected changes in a multitude of factors,” Dickhut added.