Harvest season has begun in earnest throughout the Corn Belt, and the next six weeks will reveal the results on what is widely thought to be a large, high-yielding crop. The fall also marks the start of what is traditionally the busiest season of the year for land sales. Below, we will take a look at some of the factors currently affecting the land market.
Grain Prices: After the historic run of elevated grain prices from late 2020 through the first half of 2024, we have witnessed a significant decline since mid-June. A variety of factors have contributed to this decline, including the anticipation of a large crop in 2024. A weather scare did not materialize throughout this growing season, therefore, failing to threaten the viability of the growing crop. Additionally, South America has continued to be very active and successful in the global export market, which continues to provide an alternative to the United States for importing countries.
Net Farm Income: The depressed grain market is having a negative impact on net farm incomes, which were at or near record high levels from 2021-2023. Input costs have remained high for farmers, and this combination of factors has led to declining margins. With farm operators making up a significant portion of the land-buying population, the health of farm balance sheets plays a large factor in the price of land.
Interest Rates: Land prices have remained strong throughout this period of high interest. However, with the aforementioned net farm income scenario, interest rates may soon have a larger impact on buyers’ ability to purchase land. Not only are interest rates a highly significant factor in buying land, but they are looming large in annual operating notes, adversely affecting farm earnings. The recent rate cut and future decisions by the Federal Reserve will be a storyline to follow.
Summary: The news is predominantly bearish when it comes to the current ag economy. From a historical perspective, the land market is still very strong. However, recent trends are revealing a weakening in the market. High quality farms are still in high demand. Lower quality farms with poorer soils or a lack of drainage are proving to be worth less in this market than they were six months ago. The supply of farms on the market for this sales cycle is still being determined, and that will play a factor as well.
3rd Quarter Sales:
Clinton County, IN
19.7 +/- acres sold
$463,000
Tippecanoe County, IN
40 +/- acres sold
$560,000
Jasper County, IN
164.88 +/- acres sold
$2,275,344
Madison County, IN
73.6 +/- acres sold
$1,012,000
Pending Sales:
153 +/- acres in Miami & Wabash County, IN
74 +/- acres in Boone County, IN
72 +/- acres in Benton County, IN
182 +/- acres in Clinton County, IN
209 +/- acres in Tippecanoe County, IN
71 +/- acres in Tippecanoe County, IN
Essential Reads for Land Investors
The proposed budget for fiscal year 2025 was released earlier this year by the current administration. Included in the budget was proposed reform on Section 1031 Like-Kind Exchanges. Daniel Goodwin wrote this article for Kiplinger to discuss his views on the likelihood of the reform occurring. Why the Attack on 1031 Exchanges Is Likely to Fail (Again) | Kiplinger
In the September volume of Grain: World Markets and Trade from the USDA, readers can find information on current supply and projections for exports. grain.pdf (usda.gov)
