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Farmland values remain strong despite financial headwinds

Midwestern farmland values remain strong despite a weakening ag economy.

Compeer Financial director of appraisal Adam Schmidt says a dramatic increase in interest rates should put downward pressure on the land market.

“Land is more expensive to finance, that investor category has other attractive alternative investments to earn a higher return. So it starts asking the question ‘why haven’t we really seen a decrease in land values?”

He tells Brownfield the answer mostly has to do with several years of strong farmer profitability resulting in excess working capital.

“And many of those (farmers) maybe not necessarily needing to finance that whole purchase, or paying cash for the whole purchase. So over the last six to nine months, maybe the full brunt of those higher interest rates hasn’t really been felt.”

Schmidt says a lack of supply is also supporting farmland values, especially for higher quality ground.

Schmidt made these comments during an upcoming What’s Happening with Farmland Values podcast, a content partnership between Brownfield and Compeer Financial.