For much of Indiana, Illinois, and Michigan, 2024 can be summarized as an “average to below average” or “nominal” year in the agricultural economy and sector, especially when compared to the prior two years.
Key Metrics:
Yields
- Similar to or slightly below prior years, ranging from average to slightly above average.
Commodity Prices
- Significantly lower than in 2023 and markedly below the highs of 2022.
Net Incomes
- Substantially below 2023 levels and significantly below 2022.
Land Values
- First Half of 2024: Maintained strength, comparable to 2022 and 2023.
- Third Quarter: Initial signs of weakening began to appear.
- Fourth Quarter: Increasing signs of decline, with fewer areas holding strong. Despite this, prices remained decent overall.
- Year-end comparison: Declines ranged from 0% to 10% from the historical highs observed over the past few years.
Observations:
- Rise in Failed Auctions
The fourth quarter experienced a rise in failed auctions and no-sale outcomes compared to the prior three years. This trend may be attributed to several factors, including buyer expectations influenced by previous local sales and the format in which some sales have been conducted. Sellers and land brokers should exercise caution in assuming that auctions are the optimal or exclusive sales method. A comprehensive due diligence process by land professionals should be expected when recommending any sales approach. - Decline in Active Bidders
A noticeable decline in active and aggressive bidders/buyers was evident, which could make certain sale methods, such as auctions, less effective.
Contributing Factor:
- Interest Rates: The continued elevation of interest rates discouraged many potential buyers from taking on additional debt at these levels, which was particularly concerning given the significant reduction in net farm incomes.
Positives:
- Strong Regional Yields: Certain regions experienced historically strong crop yields, contributing positively to farm incomes.
- Early-Year Pricing Opportunities: Early pricing opportunities, when strategically leveraged, helped maintain or even improve net farm incomes.
- Disaster Relief Support: The recent disaster relief bill, passed by Congress and signed by the President, is expected to assist in offsetting potential farm losses, thus mitigating the impact of ongoing economic challenges.
- Strong Land Values: Some areas maintained strong land values throughout the year, providing stability in agricultural investments.
- Optimism from Decreasing Interest Rates: Slight decreases in interest rates have provided some optimism, signaling potential relief from inflationary pressures that have driven up crop input costs and tightened profit margins.
- Continued 1031 Buyer Activity: Ongoing activity in 1031 exchanges indicates sustained investor interest and continued movement in agricultural real estate markets.
Looking Ahead: 2025
Net Farm Incomes
Current commodity and crop input prices suggest income levels at or below those of 2024. Unless there is a significant “bumper” crop or an unexpected surge in prices, net farm income prospects for 2025 remain bleak.
Land Values
Further declines in land values are likely unless there is a substantial shift in commodity prices or a notable drop in interest rates.
- Anticipated trend: Gradual decline rather than a sharp drop or collapse, with values stabilizing at levels supported by the current and short-term agricultural economic outlook.
- Even with declines, land values are expected to remain historically strong, exceeding levels seen in 2020 and prior.
What Does This Mean?
For Potential Sellers:
- Timing: If considering selling in 2025 or 2026, it may be advantageous to list/sell your property before March 2025 or during the first half of the year, as recent market trends suggest the possibility of further declines as the 2025 calendar year progresses.
- Properties could still achieve up to 90%+ of their historical peak value.
- Set Realistic Expectations:
- Be mindful of the information you receive. The agricultural real estate market is filled with varying opinions, and not all sources provide sound advice. Our extensive experience and knowledge can help mitigate any narrow or misguided overviews of the market.
- High-quality professionals specializing in farm transactions are limited. Seek out experts with a proven track record in your region. It has become very common in the real estate industry to “buy” the business and sell volume. We maintain our fiduciary responsibility to each client and provide the best opportunity for maximized results.
Why Choose AcrePro?
- Honesty & Transparency: We deliver straightforward, realistic feedback about your property and the market. Overpromising and underdelivering damages reputations and is a recipe for failure.
- Timely Communication: Excellent and transparent communication is at the core of our values.
- Market Expertise: Our deep knowledge of the market, comparable sales, transaction details, key players, and buyer network allows us to provide a comprehensive analysis of your property. We tailor the best sales options and methods to meet your needs.
Selling your farm is one of the most significant decisions you will make. At AcrePro, we pride ourselves on providing the expertise and integrity necessary to guide you through this process successfully.
