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Incomes Down, Land Values Stay Strong

Family farm barns and silos

2023 may not be as lucrative as 2022 for some landowners but farmland values are increasing faster than the rate of inflation. Those are two mixed factors impacting farmland owners right now.

The USDA forecasted a 22% decline in net farm income in 2023 compared to the previous year. That includes a 4.3% reduction in total farm cash receipts. Lower commodity prices and higher production costs contributed to those dips.

Remember that 2022 saw a net farm income jump of 31%, according to the USDA. As producers deal with smaller incomes in 2023, they might take comfort in knowing the strength of their most valuable asset: their land.

“In the U.S. farm sector, real estate accounts for $4 of every $5 in assets. That is what makes it such an important indicator of a farm’s resilience. In 2023, farm real estate increased across the board, with higher average percentage increases for U.S. cropland prices,” AgAmerica, the agricultural land lender and private investment manager, stated in its 2023 U.S. Farmland Report.

And the USDA predicted the value of those primary assets, the land, would increase six percent over the year. AgAmerica cites five factors for landowners to watch as they think about whether they can expect additional land value appreciation.

1. Cash Rents – Historically, as AgAmerica points out, the more expensive the farmland is, the higher the expected rent.

2. Interest Rates – There is a correlation between interest rates and the 10-year treasury constant maturity rate. They are not identical but their trends can be similar.

Some background on 10-year treasury constant maturity, courtesy of

What it means: An index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a 10-year maturity. Yields of Treasury securities at constant maturity are determined by the U.S. treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market.

How it’s used: This figure is used as a reference point to establish the price of other securities such as corporate bonds. Treasury securities are considered risk-free since they are backed by the U.S. government. This figure, and an added margin based upon the risk involved, is used in prices various debt securities.

Notice in the chart below the yield’s upward climb since 2022.

Market Yield Securities

RELATED: goes in-depth on the history of the 10-year treasury constant maturity rate here and shows how that rate spiked to nearly 16% in the early 1980s and plummeted toward zero during the economic collapse with COVID-19. See that research here. And you can see a chart from Macrotrends on a long-term view of interest rates here.

3. Commodity Prices – Farm income can be significantly influenced by commodity prices. And that income then impacts farm revenue and real estate values. Landowners need to track commodity prices and input costs as they build budgets and estimate investment returns.

4. Parcel Levels – Numerous factors determine the value of the land. What is soil productivity? Is the farmland contiguous or does the property also include ponds, roadways or timber?

5. Government Policy – COVID-19 aid, The Farm Bill, federal crop insurance and many others can provide a source of capital for landowners. More available cash on hand might mean farmers can buy additional farmland, which can increase values.


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