Here's Why Buying U.S. Farmland Just Became More Expensive


By Tyne Morgan, FarmJournal's Pork 

August 4, 2022


Another interest rate hike by the Federal Reserve last week means unless you’re sitting on a lot of cash, buying farmland will become even more more expensive. Both agricultural lenders and economists are watching the possible impact higher interest rates will have on not only the number of farmland sales, but the price.


Just a year ago, the bull-run on Iowa farmland sales continued to play out. Less than two weeks after a piece of farm ground in Iowa sold for $19,000 per acre, a new record sale was posted in Iowa Friday, cashing in at $22,600 per acre. Those sales sparked a number of record sales through the second half of 2021 and the first half of 2022.


The summer issue of  “The Feed” by Farmer Mac just released acknowledges the current agricultural economy has some resemblance to the economy leading up to the Farm Crisis of the 1980s.  However, economists point out there are key differences that indicate 2022 is different. As a result, Farmer Mac says agriculture is in a strong position and far better prepared to withstand a possible downturn.


Surviving an economic downturn is one thing, but making major investments – like in farmland – is another. Jackson Takach, chief economist for Farmer Mac, says the current environment of rising interest rates could impact farmland investments, and in turn, farmland values.


“People think about more long-term impacts of their investment in agriculture,” says Takach. I'm going to think about what is my return or what is my cost on buying that piece of land or selling that piece of land? Higher interest rates raises that cost of capital for farmers, either existing farmers, people who want to get into farming as an investment or as a new farmer.”


Takach says one signal Farmer Mac is watching is when it comes to the secondary mortgage for agricultural real estate lending. He says it's an area Farmer Mac is watching closely...


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