In recent years, farm real estate (land and structures) has typically accounted for about four-fifths of the total value of U.S. farm assets (see more on farm assets and debt, including real estate). Following the 1980s farm financial crisis—during which farmland prices declined in response to rapidly rising interest rates and higher energy prices—farm real estate values (land and buildings) have largely leveled off since 2014, after exhibiting above-average growth in prior years. USDA's Economic Research Service (ERS) research examines trends in farmland values, and assesses the effects of both macroeconomic factors (interest rates, prices of alternative investments) and parcel-specific factors (e.g., soil quality, government payments, proximity to urban areas) on farmland values. Among its other findings, this research reveals that in the last few years, U.S. farmland values have been supported by strong farm earnings: since 2009, average income from farming has been more than sufficient to service the debt on farm real estate purchases at current mortgage rates. However, there have been periods of imbalance in the past, including over the 2005-08 period and during the 1978-85 farm financial crisis. In addition to farm earnings, historically low interest rates are a significant contributor to the farm sector's current ability to support higher land values. Strong farm earnings have helped the farm sector in many regions to withstand the downturn in the residential housing market. Consequently, the slight depreciation of farm real estate values seen in 2016 is likely a response to expectations of lower farm earnings due to declines in crop and livestock receipts (see the data product on Farm Sector Income & Finances).
Regional variation in farmland values is significant, owing to general economic conditions, differences in the health of local farm economies, policy, and location-specific characteristics that affect the returns to farmland. In the Corn Belt, farm real estate values were over twice the national, per-acre average in 2016, whereas values in the Mountain region were less than half the national average. Individual regions have also experienced different trends in appreciation in farm real estate values. Most recently, the Pacific and Southern Plains regions saw the highest rates of annual appreciation of 3.4 percent and 1.6 percent (to $4,940 and $1,930 per acre), respectively, in 2016. In contrast, farm real estate values in the Northern Plains and Corn Belt experienced respective declines of 4.3 percent and 0.9 percent (to $2,240 and $6,290 per acre) over the 12 months ending June 1, 2016.
Farmland values also vary by land use. Historically, U.S. cropland has maintained a substantial premium over pastureland due to higher per-acre returns, as evidenced by cropland's higher cash rental rates. The value differential between cropland and pastureland has been declining in recent years in most regions, with some regions recently seeing pastureland values (but not rents) exceeding cropland values. Continuing that trend, pastureland values remained stable at a national average of $1,330 per acre over 2015-16, compared to a nominal 0.3-percent depreciation (to $4,090) of cropland values.
Annual farmland rents measure the value of using land for agricultural production in the current year. Similar to the national pattern for farmland values, cropland cash rents are much larger than pasture cash rents. Over 2015-16, cropland and pasture rents declined by 5.5 and 7.1 percent, respectively, which was greater than the decline in land values over the same period. Cropland rents declined in all regions of the United States, aside from the Northeast, which experienced a slight, 0.7-percent, increase. The decline in cropland rents was largest in the Northern Plains (7.0 percent) and Pacific (6.5 percent) regions. Over 2015-16, changes in pasture rents were more varied compared to those for cropland rents. Excluding the Northeast, for which pasture rent data was not available in 2015, four regions experienced a decline in pasture rents, while five regions saw an uptick. The decline was greatest in the Northern Plains (12.5 percent), which contrasts with the 5.6-percent increases experienced in the Southeast and Delta States regions.
For ERS research that examined the factors contributing to these changes in historical relationships, see:
- Trends in U.S. Farmland Values and Ownership (February 2012).
|Region||Farm real estate value||Cropland value||Cropland rent||Pasture value||Pasture rent|
|U.S. total (48 States)||3,010||4,090||136||1,330||13|
|Note: NA = not available.
Source: Land Values, 2016 Summary, USDA, National Agricultural Statistics Service, August 2016.
Annual data by region and State are available from QuickStats.
Links to key farmland value data sources:
- Historical data on selected statistics on farm real estate, 1950-86, by State.
- Historical data on average gross cash rents and rent to value rates, 1960-94, by State.
- Recent data on land value and rent through NASS' QuickStats.