USDA’s recent 2019 Land Values report revealed the average value of agricultural cropland as $4,100 per acre. That includes buildings on farms. The value is an increase of $50 per acre or 1.2 percent from the previous year.
The value of cropland in 2019 ties the record reached in 2015 and represents a 55 percent increase in cropland values during the past decade.
The average value of pastureland was a record $1,400 per acre in 2019, an increase of $30 per acre or 2.2 percent from the prior year.
The average value of all agricultural land was $3,160 per acre in 2019, an increase of $60 per acre or 1.9 percent from 2018.
State-level agricultural-land values detailed
Across the United States agricultural land values were the best in states near urban areas such as Rhode Island, Connecticut, New Jersey, Massachusetts and California. Outside of urban areas, agricultural land values were best through the Corn Belt, the Great Lakes region, the Southeast and the Pacific Northwest. Western states, reflecting the greater percentage of pastureland, had lesser average agricultural-land values. Figure 1 highlights the average agricultural land value per acre in 2019.
- California saw the largest increase in agricultural-land values in 2019, increasing 7 percent or $650 per acre from 2018.
- Delaware saw agricultural-land values increase more than 6 percent, representing a $540 per acre increase from 2018.
But in several states agricultural-land values decreased, most notably in Iowa where land values declined by 1.1 percent from the previous year. That marks the fifth-consecutive year that land values in Iowa have declined. Average land values in Iowa have decreased 14 percent since 2014. During the past five years Iowa has seen the steepest decline in agricultural land values – decreasing $1,130 per acre or 14 percent. Figure 2 identifies the year-over-year change in agricultural-land values. Figure 3 identifies the five-year change in land values.
Cash rental rates increase
In addition to owning agricultural land, many farm operators also rent cropland for farming activities. Those rental agreements are generally made in the fall of the prior year; 2019 rental rates were agreed to in fall 2018.
USDA’s state-level estimates of cash rents for cropland for 2019 reveal a U.S. average rental rate of $140 per acre, an increase of $2 per acre or 1.4 percent from 2018. It marks the second-consecutive year of rental-rate increases.
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Cash rental rates were the most in areas with the best productive cropland – including California, Arizona and Washington as well as across the Corn Belt and in the Great Lakes region. Figure 4 highlights the cash rental rates for cropland.
Several states saw significant increases in cash rental rates.
- California rental rates increased by more than 24 percent.
- Utah rental rates increased by 18 percent.
- Pennsylvania rental rates increased by almost 17 percent.
Across the United States cash rental rates for cropland declined in 15 states out of 40 states with year-over-year results available. The decline in rental rates was the most in Virginia at negative-6.3 percent followed by Arkansas at negative-5.4 percent.
Following the change in agricultural-land values, several Corn Belt states also saw decreased cash rental rates. Focusing again on Iowa, cash rental rates decreased or were unchanged for the fifth-consecutive year. They have decreased 12 percent from the 2014 best rate of $260 per acre. Figure 5 identifies the year-over-year change in cropland cash rents. Figure 6 identifies the five-year change in cash rents.
Given the downturn in net farm income and net cash income experienced across much of agriculture during the past five years, many had anticipated that agricultural-land values and cash rents in the United States would weaken.
As USDA’s most recent land-value survey indicated, that has not been the case in aggregate. Instead agricultural-land values have continued to increase. They have paced with inflation since the collapse in farm income that occurred in 2014. Consider that in the 20 years prior to 2014 agricultural-land values and net cash income was correlated at 86 percent. But since 2014 – and while a small sample size –those values are now negatively correlated. That highlights the growing disconnect between land values and farm income. But it's a national average perspective.
At the state level cash rents and farm income seem to be more aligned. Many of the areas with declining agricultural-land values and cash rents during the past five years are found in the Midwest. There a prolonged downturn in crop and livestock prices has reduced net cash income. One factor that will certainly provide some support to agricultural-land values and cash rents is the administration's effort to financially offset trade losses.
While Market Facilitation Program payments do not guarantee profitability, they can help to reduce losses and ameliorate financial pressures. The improved financial performance of farms may ultimately keep the supply of agricultural land shorter – and enable farms to hold onto cash-rental agreements – than would have otherwise been the case without trade assistance. But that support is short-lived. Without a long-term solution to the trade disruption, and absent a weather-related supply disruption or fundamental change in demand, U.S. agriculture will likely need to reallocate resources. If such a reallocation reduces farm profitability look for land values – the asset base of agriculture – to go along for the ride.
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John Newton is the chief economist with the American Farm Bureau Federation’s Market Intel. Visit www.fb.org/market-intel for more information.