Agricultural Land Value Changes (post #4)
We carefully monitor the farming profitability equation and the Ag Economy Barometer as key insight into what we can expect for farm property values and rental rate returns. Agricultural farmland values, farmland income, and the properties capitalization (CAP) Rate have relationships that can help determine how each may react regarding each other’s movements. For example, farmland values and farmland income will move in conjunction with each other, both values will increase or decrease together in the same direction. However, farmland values will move inversely with CAP Rates, increasing as CAP rates decrease. The following graphic illustrates these relationships.
Given the decrease in farmland income for most of the agricultural industry discussed in the second post in this series, we can anticipate downward pressure to be placed on both farmland values and CAP rates. The question is, however, how quickly and to what extent we could expect. We gain more insight by looking at the National Council of Real Estate Investment Fiduciaries (NCREIF) dataset, which is a compilation of reported returns from institutional agricultural investment firms from across the country.
Appreciation rates as reported by NCRIEF Annualized Quarterly data show a Year-on-Year increase of 0.6% for annual cropland. Meaning that while the average value of U.S. row cropland is still appreciating in value, it is doing so at an ever-slower rate since 2022.
What About USDA?
USDA recently released their estimated farmland returns for 2025, which contrast somewhat sharply with the NCREIF figures. Below we see the estimated returns for all US Rowcrop Land, with USDA reporting an increase of 4.7% vs 2024 and NCREIF coming in much lower at 0.6%. Although the two reports tend to move together and are highly correlated at 84.3%, the USDA figures tend to be more volatile with higher highs and lower lows.
There are several possible reasons for the discrepancy. For starters, USDA data is based on state-by-state surveys conducted each spring, whereas NCREIF reports every quarter, with the main emphasis on end of calendar year Q4 results. Additionally, the chart utilizes USDA survey results as of June (the only time USDA publishes it) with NCREIF Q4 results. The exception is for the current year, which are the the just issued USDA June figures vs NCREIF Q2.
A second likely reason is that they are measuring slightly different things; USDA surveys include all farmland of all different parcel sizes and operations. NCREIF data is drawn from member quarterly reports of member owned farms and parcels, which tend to be larger and are weighted more towards the Cornbelt, Delta, California, and the Pacific Northwest. We’ll be exploring these data sets in more depth in a future post.
Acting On Insight
Considering all the information, commodity price, rising input costs, low farmer sentiment, and slowing appreciation rates careful and strategic decisions seem the obvious move as we head into harvest and the 2026 planting season. However, the challenge of this economy can also come with great opportunity for those ready and looking. For those going into 3rd party management lease negotiations, now is a great time to clearly define the long-term goal and priorities for the property. Challenging economic times can often expose areas of risks or opportunities for improvement in infrastructure, processes, or relationships. Now is a great time to identify and mitigate against those risks. Determining the optimal crop profile for next year will challenge the producer’s acumen in marketing and business finance savvy. And more than ever in times of economic stress, Cash is King! Access to cash or additional working capital can allow individuals to capitalize on unexpected purchases that will position them for long-term success.