Agriculture Land Ownership
The landscape of land ownership has evolved over the past quarter century, as a generational transfer of ownership takes place. Landowners today are a diversified mix of producers, inheritors, retirees, and investors. All are striving for and fully expect a return on their land asset.
Looking at land values over the past 25 years, incremental appreciation is very apparent, with the last three years experiencing double-digit increases in value across most Midwest states. What began as slow value growth in the late ‘90s accelerated into the early and mid-2000s to the land values we see today.
What are the dynamics driving this market and what factors will sustain the strong values?
A strong ag economy.
This will continue to drive the land market with producers’ desire to expand operations and involve additional family members in existing operations. Positive aspects of the ag economy also encourage outside investment in a valuable and historically appreciating asset.
In today’s land market, producers often outbid investors for land purchases due to their lower cost of production and operational scale. However, even in that event, the land investor remains a key factor in establishing a floor in land values that a producer must compete against.
What economics are behind land values?
Supply and demand.
Most landowners have realized the steady increase in value over the past 25 years, but especially the change within the past three years. For many, this has brought consideration to sell at historically high values, while for others it has brought the realization of a valuable asset to retain.
The retention of land as an asset has played a part in limiting the land available to the market during a period when we see a strong demand from interested buyers. There are simply more motivated buyers than land available for sale across most areas of the Midwest.
What will the next 25 years bring?
One market dynamic we can always count on is change. Politics, evolving climate, and world events will continue to spur change in the agriculture economy and, subsequently, land values over the next quarter century. The generational transfer of land ownership will bring about changes in who owns the land.
One constant consideration is the old adage about land: “They are not making more of it.” In fact, when we take into consideration that we lose, on average, 1.8 million acres of farmland in the United States per year, this only adds to the limited supply available and more change.
The resiliency of the land market over the past quarter century has been nothing short of amazing, and we look forward to experiencing where it and land ownership will take us next.