Cropland values remain high

WABASH, Ind. — Since early 2021, there has been a dramatic upward shift in the value of cropland.

Howard Halderman, president of Halderman Real Estate and Farm Management, discussed trends during a webinar.

Summary of Halderman sales:

• Majority of sales were cropland.

• The first six months of 2021, 17% of sales were over $10,000 an acre.

• The second six months of 2021, 88% of sales were over $10.000 an acre.

• The average sale price at auction in 2022 was $10, 525 an acre — up 17.6% from 2021.

Where values go from here depends on three factors, Halderman said: farm income, interest rates and supply.

“As we look forward to 2023, cropland values are in an uptrend,” he said. “We think they’re going to continue to move upward. Those other types of real estate, though — timber, recreational, rural residential — may be steady to slightly weaker.”

Halderman listed the following reasons for his bullish outlook:

• Profitable prices.

• Low amount of debt versus assets in agriculture.

• Moderate supply of farms for sale.

• Biofuel demand and Renewable Fuel Standard.

• World population growth.

• Trade deals.

• Inflation.

• Water resources and competition.

He also presented an argument for potential bearish cropland prices.

“Brazil is going to raise the biggest soybean crop ever, and competing with U.S. on corn,” he said. “A good production year in South America combined with a good production year in the U.S., we could be looking at $4.50 or $5 corn, which is below cost of production.

“Combined with increased interest rates, it could be somewhat bearish. Those are things to watch.”

For those who want to buy low, sell high — now is a “sell high” moment.

“If you own farmland, even if you adjust for inflation, you’re at the all-time high of farmland ownership values,” Halderman said.

“I’m not suggesting you sell your farm. I’m just throwing that out there.

“That being said, there could be dark clouds on the horizon. Recreational land, timber land and rural residential values are all a part of the landscape in the eastern Corn Belt. … Those numbers are showing a little less strength today because of higher interest rates.”