Farmland values in the Upper Midwest continued to move higher in 2023, surpassing the highest levels ever in many areas. The very high net farm income levels in 2021 and 2022 provided many farm operators with some extra cash resources to invest in farmland purchases in 2023. The enhanced farm income levels, together with a somewhat limited amount of land offered for sale in many areas, resulted in continued higher land values in many portions of Iowa, Minnesota and other areas of the Upper Midwest during 2023. Many areas of the Upper Midwest were somewhat dry in 2023 and experienced average to slightly-below average corn and soybean yields in 2023; however, there were some areas that benefitted from timely rainfall to achieve above average yields. Crop prices were solid early in 2023 and then declined later in 2023. These factors and the much higher real estate interest rates in 2023 did not seem to have a major impact on the land values for the year.

Iowa State University does a comprehensive land value survey each December, which is regarded as one of the best resources on trends in Midwest farmland sales. The Iowa State Land Value Survey is based on actual land sales in Iowa over a 12-month period, as well as from reports by agricultural professionals that are knowledgeable regarding land market conditions, including appraisers, farm managers, and ag lenders. The complete 2023 Iowa State Land Survey results can be found at: (Note — Refer to the Table at the end of this column for a summary of Iowa land values from 2009-2023.)

The average value of Iowa farmland in 2023 was of $11,835 per acre, surpassing the 2022 average of $11,411 per acre, which previously was the highest average land price ever recorded since the Iowa State survey was initiated in 1941. Since the recent low point of $7,183 per acre in 2016, the Iowa Land Value Survey has shown an increase of 65 percent, or $4,652 per acre, in the past seven years (2016-2023). This includes a 57 percent increase in land values in a span of three years from December of 2020 until December of 2023.

Based on USDA land value data, land values in the Upper Midwest have shown large increases in the past three years (2020-2023). The highest 3-year percentage increases were Kansas at 65 percent, Nebraska at 57 percent, and South Dakota at 50 percent. Other reported increases in land values from 2020 to 2023 were Minnesota at 42 percent, Iowa and Wisconsin at 41 percent, North Dakota at 37 percent, Indiana at 35 percent, and Illinois at 31 percent. Many of these States have been hard-hit by drought at some point during the past three years; however, that has not seemed to slow the trend toward much higher land values.

The average land values in 2023 increased in eight of the nine Iowa crop reporting districts as compared to 2022 average values, with only the Northwest district showing a slight decline. The Southeast district in Iowa recorded the greatest year-over-year increase in in land values in in 2023 at a 12.8 percent increase, followed by the South Central district with an increase of 9.8 percent. All of the other Iowa districts, except East Central district, reported land value increases between 2.6 and 3.7 percent in 2023. The Northwest district reported the highest 2023 average land value in Iowa at $14,753 per acre, with the North Central, Northeast, West Central, East Central, and Central districts all averaging over $12,000 per acre.

Trends in farmland values in Southern Minnesota have been tracking very closely to the trends shown in the Iowa land value survey for northern crop reporting districts in Iowa. Similar to many areas of Iowa, land values were much higher in 2023 in most portions of Southern Minnesota due to the strong farm income levels in recent years for many farm operators. There have been numerous land sales across Southern Minnesota that have topped $12,000 per acre in the past 12 months, with some isolated sales over $15,000 per acre. Even with the higher land values, there has continued to be a gap between the prices that are being paid for high quality, well-drained land, as compared to lower quality land that is poorly drained.

Based on the recent Iowa State Survey, active farmers accounted for approximately 70 percent of the farmland purchases in Iowa in 2023, which was primarily existing farm operators that were expanding their land base. About 24 percent of farmland was purchased by real estate investors, with about half being retired farmers and other local investors and the other half being non-local investors. The remaining 6 percent was sold for other purposes. The main reasons listed for the strength in farmland values was continued strong farm income levels in 2023, the limited supply of land offered for sale, and strong local demand for land in 2023. There has continued to be strong interest for purchasing land among farmers in many areas as we enter 2024.

The U.S. Federal Reserve increased the prime interest rate by 5.25 percent in an eighteen-month period, increasing the prime rate from 3.25 percent in early 2022 to 8.50 percent in mid-Summer of 2023, which remains the current prime rate. The Federal Reserve continues to discuss the likelihood of possible modest decreases in the prime interest rate during the balance of 2024; however, that is not certain at this point. Prior to 2022, the prime rate interest rate had not changed in nearly three years which provided a stable financing environment for farmland.

Following is an example to show the impact of the rapid rise in long-term interest rates ……
Assume that a land buyer purchased a 160-acre parcel of farmland and financed $6,000 per acre ($960,000 total) with a 25-year amortized real estate mortgage (REM). Following are the estimated annual principal and interest (P & I) payments at various prime rates, as the long-term interest rates have increased:
• 3.25 % Interest Rate = $56,678 per year P & I payment
• 4.50 % Interest Rate = $64,741 per year P & I payment
• 6.50 % Interest Rate = $78,702 per year P & I payment
• 8.50 % Interest Rate = $93,803 per year P & I payment
From early 2022 until the current rates in 2024 that represents an increase in the estimated annual REM P & I payment of over $37,000 per year, at the listed prime rates. On the 160 acres of farmland in this example, the increased interest rates in the past 2-3 years would add approximately $230 per acre to the annual cost of the land.

As part of the 2023 Iowa State Land Value Survey, respondents were asked their opinion regarding the future direction of farmland values during the next five years. Forty eight percent of the respondents expect Iowa farmland values to decrease by the end of 2024 as compared to 2023, with most expecting a decrease of 5 percent or less. Twenty-two percent expect farmland values to remain fairly steady in the next 12 months, while 30 percent forecast an increase in Iowa land values the end of 2024. When asked about farmland trends over the next five years, 70 percent of the respondents expect land values to increase, with most expecting an increase of 10-20 percent, while 30 percent feel that future land values will remain steady or decline in the next few years.

Currently, most signs point toward stability and possibly some modest decreases in land values in the next 12 months. There are some lingering “caution flags” that could put potentially put even more downward pressure on land values. These potential challenges include:
• The current trend toward lower crop prices and lower profitability in crop and livestock farming.
• Further increases in long-term interest rates by the Federal Reserve Bank later in the year or in 2025.
• Reduced interest in purchasing farmland or a large increase in the amount of land being offered for sale.
• Lack of confidence in the land market by farmers, investors and ag lenders.

As we enter a period of lower commodity prices and tighter margins in crop and livestock production, farm operators need to be more cautious on over-extending their farm business to purchase land. This is especially the case for beginning farmers and those borrowing a significant amount of money that will be impacted by the higher long-term interest rates. It is best to sit down with a good farm business financial advisor or ag lender to analyze the potential financial impacts on the farm business before finalizing the farm purchase decision. ****************************************************************************************** Note — For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone — (507) 381-7960; E-mail —

Following is a table showing the average value of Iowa farmland for the past 15 years (2009-2023), and the percentage change in land values from year-to-year:

2009                         $ 4,371                                 (2.2 %)
2010                         $ 5,064                                 +15.9 %
2011                          $ 6,708                                 +32.5 %
2012                          $ 8,296                                 +23.7 %
2013                          $ 8,716                                  +5.1 %
2014                          $ 7,943                                  (8.9 %)
2015                          $ 7,633                                  (3.9 %)
2016                          $ 7,183                                  (5.9 %)
2017                          $ 7,326                                  +2.0 %
2018                          $ 7,264                                 (0.8 %)
2019                          $ 7,432                                  +2.3%
2020                         $ 7,559                                  +1.7%
2021                          $ 9,751                                  +29.0%
2022                         $11,411                                  +17.0%
2023                         $11,835                                 +3.7%
NOTE — This data is from the 2023 Iowa State University Land Value Survey.