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The Rising Price of Farmland

The Rising Price of Farmland
January 11, 2023
Bradley Calleja

Image: Zoomer Auctions

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We won't bury the lede. Mark Twain was right: it's land they aren't making any more of, and those who took the famed authors' unsolicited investment advice (did he slap a "DYOR" on there?) are reaping the rewards. In 2009, the average price per acre of cropland in the United States was $2,540.

In 2022, the average climbed above $5,000, representing a 90% gain overall and an annualized increase of 7%. While those returns might seem modest, it's been the fertile lands of the midwest that are delivering unprecedented rates of appreciation.In Iowa, where 90% of its land is devoted to agriculture and approximately 16% of the nation's corn is produced, land values climbed 17% between 2021-22. The average price per acre has outpaced the national average with an increase of more than 160% since 2009. Prices throughout the eastern half of the midwest, including land in Indiana, Michigan, and Ohio, are also experiencing an upward swing, with the average price for an acre rising by 20% year-over-year.

Even the northwest corner of the Corn Belt experienced similar rates of appreciation as farmland throughout the Dakotas and southern Minnesota increased by 25%.In Major League Baseball, there's the 3,000-hit club, which is an accomplished group of 33 players who, as the club name indicates, recorded 3,000 career hits. In the NBA, there's the 30,000-point club, which represents a group of just seven players who sit near the top of the league scoring record.In farmland real estate, there has long been a $20,000/acre club, which became the pinnacle price target for the most lucrative lands throughout the midwest. As of November, the $20,000/acre club now has to make room for a new circle of costly cropland.Enter: the $30,000/acre club. On November 11th, the 73-acre Kraai Family Farm, located in Sioux County, Iowa, and pictured above, was auctioned by the Zomer Company. When the dust settled, the farm sold for $2.19 million, or $30,000 per acre, which established a new all-time high for any public farmland sale in Iowa history. The record-breaking result in Iowa followed Nebraska's record, which was set less than one month prior when a tract featuring 116 acres of corn and soybean-covered land realized $3.18 million, or $27,400 per acre. Between 2009-2021, the surge in farmland valuations was primarily attributed to low-interest rates, an increasing international buyer pool, and the limited availability of arable land. In 2022, the cheap-debt argument was buried as the average interest rate on farm real estate climbed above 6%, and reports coming from inside the auction houses facilitating these record sales are discrediting the 'outside buyer' theory. Today, foreign investors own just 3% of all farmland in the United States while the buyers of the record-breaking Iowa and Nebraska fields were both local operators.With concerns regarding the global food supply and the sustainability of large-scale factory farms, the emphasis on prioritizing generational farmers has expanded into the sports world. Earlier this week it was announced that a lineup of athletes including Joe Burrow and Blake Griffin were investing in an agricultural investment fund curated by PatricofCo. The fund has already purchased 104 acres of corn and soy farms with plans to lease the land to local farmers throughout northern Iowa.

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