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Serving: MO
man placing real estate auction sign in field
MORE SALES? More farmland is being auctioned off as farm debt rises. Just how much depends on how long stressors such as trade uncertainty and low commodity prices last.

Where will cropland prices go?

A recent survey by USDA's National Agricultural Statistics Service finds stability in Missouri land values — for now.

In a year of immense pressure on the agriculture economy, land values remain stable throughout much of the Midwest.

According to a USDA National Agriculture Statistics Service study, the average value of Missouri cropland did not change from 2018 at $3,390 per acre. However, the figures found that the average value of cropland was down $190 per acre since 2015.

Northern states that border Missouri saw cropland values reach up to $7,300 per acre this year. However, they too are showing steep declines in land values since 2015 — Iowa is down $600 per acre, Indiana is down $570 per acre, and Illinois is down $280 per acre.

Randy Dickhut, senior vice president of real estate operations for Farmers National Co., is concerned about the prolonged stressors on farm economy land sales.

The company already is seeing a 29% increase in the number of acres sold compared with last year and 22% from over two years ago.

“Farmers National is seeing an increase in the number of farmland sales by financially stressed producers due to multiple years of reduced income,” Dickhut says. “Some of these sales are sold quietly and not exposed to the marketplace to get top dollar. Other sales are coming from producers who are proactively liquidating a land asset to improve their balance sheet and cash flow.”

CROPLAND VALUES: Missouri is still well behind neighboring states to the north and east in terms of average farmland values. But the state is seeing a slower decline in value over the past five years.

U.S. farmers and ranchers are now in their sixth year of downturn in overall farm net income. Earlier this year, USDA Secretary Sonny Perdue testified before the House Agriculture Committee that, “Net farm income has fallen nearly 50% from its peak in 2013.” 

In his 2019 Agriculture Outlook, USDA Chief Economist Robert C. Johansson explained that as farm income fell over the past few years, farm equity also fell, but it is only down about 5% from the peak in 2014, due in part to stable, high land values. However, he says farm debt is rising.

During the 1980s, the U.S. lost overseas markets because of a global slowdown, and farm debt and equity both fell by about 44%, Johansson explains. Since the 54-year low point for farm debt in 1992, he added, farm debt has slowly increased.

There is likely to be more uncertainty surrounding the sale and price of ag land in the coming year. Will farmers sell off land assets to settle debt? Will more land on the market decrease prices per acre? And where are interest rates headed?

“As 2019 unfolds, the land market will remain on edge watching farm finances, weather and trade issues,” Dickhut says. “The outcome of these and other unknowns will guide which direction land values will move over the coming months. With the land market on edge, buyers and sellers of land need the most trusted advice available to navigate the uncertainties.”

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