Farm Trends and Forecast for 2022 - United Country Real EstateBy Natalia Kome
January 14, 2022
Anything you need to know about farm trends and forecasts for 2022.
Farm Property Trends and Forecasts for 2022
The supply and demand for farmland in 2021 remained steady. More people have become more interested in buying farmland and many in the real estate industry have reported that there has been an increase in the amount of farmland sold in 2021, especially in the third quarter of the year.
What are the farmland trends in 2022?
Has the pandemic increased the interest in the production of agricultural crops and raising farmland animals to enhance sustainability?
Factors That Will Affect the Farmland Market in 2022
Farmlands can be an incredible asset. In fact, it can be one of your biggest assets if you plan to invest in one. Land values have appreciated over the past years, and it is predicted to continue to appreciate steadily this year.
There is so much value placed on farmland that farmers are considering how to make sure that their farmland will transition well into the next generation when they retire.
The USDA’s (United States Department of Agriculture) National Agricultural Statistics Service tracks and highlights the changes in farmland values every year.
The Ag Web Farm Journal reported that “For 2021, the USDA reports the value of the nation’s cropland is $4,420. That’s up to $320, or nearly 8% from 2020.” The year 2021’s cropland value is considered a record high.
What are the factors that will affect farmland values in 2022?
Supply and Demand
Farmland prices are expected to be higher if there is a shortage of land with many interested buyers.
When interest rates are high, farmland prices are expected to be high as well. But with low-interest rates, the value of farmland will increase because there will be more buyers.
More people will consider investing in farmland when interest rates are low.
When non-farmers consider purchasing farmland, local farmers are left with farmland that they do not own. This will impact the local land rental market and could increase the value of farmland.
It is expected that there will be an increase in non-farmer investors in 2022 because they expect a strong ROI on farmland investment.
Prices, Farmland Rental Rates, and Farm Income
Farm economy and ROI depend heavily on land prices, cash rents, and the income of a farm.
They will also vary depending on the location of the farm. The relationship between these three elements can affect how the value of farmland will increase.
The Productive Value of the Land
Farmland can get revenue in two ways:
Appreciation of land value
Farmers can be low on cash when the productive value of the land is low. However, they are still asset-rich because land value is usually appreciated over time.
If you are considering investing in farmland in 2022, consider the productive value of the land or how it can pay for itself over the years.
Other Factors Worth Considering
The USDA National Agricultural Statistics Service reported other factors that determine the trends in farmland real estate growth. These factors include:
Location: Farmland values increased in the Pacific States and decreased in the Northern Plains between 2016 and 2020.
Agricultural use: Croplands have had higher per-acre returns compared to pasture lands. But, this also depends on the region. For example, in the Pacific States, cropland values have risen since 2016 but have fallen in the Northern Plains. Pastureland values, on the other hand, have increased in the Southern Plains but have decreased in most areas in the Corn Belt.
Farmland Market Forecast for 2022 According to Farm Progress, the farm industry “will continue to reflect strength” in 2022. The key market differences developing for farming in future months of 2022 that are worth considering include: Higher input prices for farmland production, due to continuing strength in commodities, can decrease on-farm profits. Inflation in interest rates dims enthusiasm for the farmland market industry. The positive trend in 2021 in the farmland market is projected to remain in 2022. There was a reported high sales volume of farmland.
Higher input prices for farmland production, due to continuing strength in commodities, can decrease on-farm profits.
Inflation in interest rates dims enthusiasm for the farmland market industry.
The positive trend in 2021 in the farmland market is projected to remain in 2022. There was a reported high sales volume of farmland, including high demand for farms.
Aggressive buyers of farmland included farmers, investors, and institutions. The factors that were considered in causing this high demand for farmland properties are:
Low interest rates,
Reentry of inflation
Hence, farmland appraisers expect that farmland values will remain strong in 2022. Mike Morris, the chief appraiser for Compeer Financial commented about 2022 farmland values:
“We’ll see at least a stabilization, if not an increase in values. There’s still a lot of momentum despite more farmland coming on the market. And with outside money coming in and a lot of local farmers interested in expansion, I think that could continue.”
Commodity prices may decrease at some point, but this will not stop farmland values from being sustained. With the increase in online farm auction technology, farm properties are being exposed to many prospective buyers.
Bidding online has become easier because of the increased online presence of the farmland real estate industry.
Demand for good tillable land has also increased because of the increase in prices of commodities in the market.
2022 Outlook on Farmland Prices
Even though there has been a low supply of farmland for the past few years, the demand has been maintained to be adequate.
Hence, the steady farmland prices. In 2021, the increase in the amount of farmland sold gained favor in most regions of the country.
Doug Hensley, president of real estate services for Hertz Farm Management, commented on the price of farmland in 2022. He said that he expects the volume of sales to moderate because demand for farmland has already been satisfied and there might be higher interest rates and smaller cash flow margins.
However, he mentioned, “The outlook for the land market is positive as farmland continues to be a safe, long-term investment.”