Farmland values

Though real estate numbers remained strong and farmland appreciation continuing at its normal speed, farmland sales took a hit from COVID-19 inactivity. 

A Nebraska ranch hit the market late in 2019 with an asking price of $12 million. While that maybe an extreme example of farmland prices, there was some optimism when it came to land prices going into 2020. However, like the rest of agriculture, this year has not been kind to the land market.

Randy Dickhut, senior vice president of real estate operations at Farmers National Co., said the agricultural land market was coming into 2020 “with a glimmer of optimism” until COVID-19 erupted. The land market paused as buyers and sellers slowed down their activity.

“Farmland sales and auction activity were a little stronger than I expected coming into the year,” he said. “That last Market Facilitation Payment went out, we had a little better yield in more places than we thought, and grain prices were a little higher thanks to the trade agreement with China. We had increasing optimism until about mid-March.

“We had auctions booked through early April,” he added. “For the most part, those took place in a different format. We had some live auctions with people sitting in their pickups in the parking lot and placing their bids over a loudspeaker. Some of our auctions went online and we got some land sold that way.”

Despite some sales activity during the early months of COVID-19, Dickhut said sales slowed more than they normally do during late spring and early summer when farmers and ranchers are either planting, calving or both. Even if sellers were thinking about moving their land, Dickhut said most just put things on a temporary hold.

One segment in the land market that didn’t take much of a pause was real estate. Despite a slowdown in farmland sales, Dickhut said real estate sales were strong during the first seven months of the year. Sales volume was up 6-8% compared to the previous three years and hasn’t slowed much during this uncertain period.

“Looking around the nation, the demand for smaller acreages did begin to climb,” Dickhut said, “especially those that were close to cities. As the summer went along, interest began to grow, albeit slowly, in owning any kind of farmland. A lot of it was likely from first-time investors who were looking for the safety of agricultural real estate they could put money into.”

The uncertainty of COVID-19 and the disruptions to the food and fiber supply chains likely sent investors looking for a safe place to land, and what better place to land than investing in a farm. Studies have shown over about four decades that farmland provides a solid 10% return on investment.

That consistency over time is what makes farmland such a solid investment.

“Over time, that land is always going to be worked,” Dickhut said. “It’s never going to sit vacantly because I can rent out the land every year. It won’t always be the highest return on investment, but it’s steady and doesn’t require the same type of upkeep that commercial real estate or other rental properties do.”

The land will also appreciate 4-6% every year, he said, and that makes for a valuable investment after 30-40 years.

Some regions of the country are faring better than others when it comes to strength in the farmland market. Prices for good cropland in the Midwest, stretching from Indiana and Illinois to Iowa and into the Dakotas and Minnesota have held steady. The lower-quality land in those same areas tends to soften up much quicker than higher-quality land when prices fall.

What does the rest of 2020 hold in store for land prices? It’s hard to say right now. Dickhut said it will take a little time before they get a sense of the future trend. It’s a little bit early in the fall sales season to know for sure.

“We’ll know a little more about it after the fall harvest wraps up,” he said. “It seems as though there might be a little strength in the market in the months ahead, maybe more of a slight bump. That’s because demand is still high and there isn’t much in the way of good cropland on the market right now.”

Certain regions in rural America are seeing softer land prices, especially in dairy-heavy areas of the country.

“Wisconsin is one area where dairy farmers have been under a lot of pressure,” he said. “Smaller parts of rural America that didn’t have a good harvest last year will often be softer than the rest of the country,” Dickhut added. “Too much rain or heat can soften up demand a little bit as well.”

But it won’t soften the demand much, if at all. Farmers National Co. recently held an auction east of Des Moines, Iowa, right where the derecho storm system went through in August and did a lot of damage. The company was considering calling off the auction, but the client wanted to go through with the sale.

One tract of land on the sale was higher quality and sold right around market expectations, according to Dickhut. The other tract wasn’t as high quality but still just about met his expectations.

“You might have thought other farmers would be cautious when it came to buying land. However, any farm near yours only comes up for sale once every three or four generations, so you have to make a decision,” he said.

A lot of factors go into determining what land prices will be.

Dickhunt has heard of land going for $10,000 an acre in Illinois, and Iowa is in the same range. That’s the same for most of the high end land in the heart of the Corn Belt.

Will those prices hold?

“It is too soon to accurately answer what’s next for the land market except that agricultural land will continue to be bought and sold,” he said. “Land passing to the next generation is a constant that remains in play no matter what. Decisions made by inheritors of land, producers, lenders, legislators, and investors will come together over the coming months to provide the answer to what’s next for land values.”

Chad Smith can be reached at

Chad started out as a radio broadcaster for 22 years, then made the switch to full-time freelance journalism. He grew up working on the family dairy farm, and enjoys staying busy with his wife and six children. Reach him at