Last month, we began a 5-part series on the most important factors that influence farmland values, including:

In each instance, both the current level and any recent movement of each factor can influence farmland values. This month, we cover interest rates.

Interest rates are a major undercurrent to our entire economy. The impact of interest rates is most easily understood as a consumer of goods or real property.

When interest rates are low, it’s more affordable to do just about anything, including buying a farm. Alternatively, when interest rates increase, borrowed money is more expensive. This directs the market toward less consumption. Generally, over the long term, when rates are low, asset values rise. When rates are high, asset values fall.

What is sometimes less evident is how higher interest rates influence investors and capital flows in a market. For several years, ultra-low interest rates attracted investor dollars in search of better returns to farmland. A 3% to 4% annual cash return on land was comparatively attractive. However, when rates rose as they have over the past 18 months, excess investor capital started to flow toward better returns.

The simplest example of this is the draw of investor dollars towards short-term certificates of deposit and money market accounts over the past year, which currently pay at or near 5% interest. So, interest rates influence both ag producers who may borrow money and farmland investors with excess capital who weigh their investment decisions against many possible alternatives.

Thus far, as the sales below reflect, the impact of higher interest rates has not overwhelmed the financial strength throughout the countryside.

O’Brien County. Southwest of Sutherland, ±80 acres recently sold at public auction for $17,300 per acre. The farm consisted of ±76 tillable acres with a Corn Suitability Rating 2 (CSR2) index of 96.8, and equaled $188 per CSR2 point on the tillable acres.

Franklin County. Located near Latimer, ±96 acres recently sold at public auction for $12,100 per acre. The farm consisted of ±94 tillable acres with a CSR2 of 83.1, and equaled $148 per CSR2 point on the tillable acres.

Clayton County. Located southwest of Farmersburg, ±77 acres recently sold at public auction for $11,500 per acre. The farm consisted of ±70 tillable acres with a CSR2 of 57.7, and equaled $219 per CSR2 point on the tillable acres.

Calhoun County. Located east of Rockwell City, ±138 acres recently sold at public auction for $14,100 per acre. The farm consisted of ±135 tillable acres with a CSR2 of 86.6, and equaled $166 per CSR2 point on the tillable acres.

Boone County. Located northwest of Slater, ±155 acres recently sold at public auction for $17,800 per acre. The farm consisted of ±155 tillable acres with a CSR2 of 83.6, and equaled $213 per CSR2 point on the tillable acres.

Cedar County. Located south of Clarence, ±50 acres recently sold for $13,250 per acre. The farm consisted of ±48 tillable acres with a CSR2 of 85.0, and equaled $162 per CSR2 point on the tillable acres.

Pottawattamie County. Located north of Treynor, ±49 acres recently sold at public auction for $12,100 per acre. The farm consisted of ±48 tillable acres, with a CSR2 of 71.2, and equaled $173 per CSR2 point on the tillable acres.

Decatur County. Located south of Leroy, ±120 acres recently sold at public auction for $11,400 per acre. The farm consisted of ±118 tillable acres with a CSR2 of 69.7, and equaled $166 per CSR2 point on the tillable acres.

Keokuk County. Located west of Keswick, ±80 acres recently sold for $13,600 per acre. The farm consisted of ±77 tillable acres with a CSR2 of 81.8, and equaled $173 per CSR2 point on the tillable acres.

Hertz Real Estate Services compiled this list but did not handle all sales. Call Hertz at 515-382-1500 or 800-593-5263, or visit hertz.ag.