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Farmland Market Beginning to Plateau in Q1 2024

The farmland market may be slowing almost one full quarter into 2024. Paul Shadegg, vice president of real estate operations with Farmers National Company, says he describes the farmland market as “resilient”.

Shadegg says, “Even with all the headwinds we’ve got with some declining commodity markets, interest rates where they’re at, the concerns that the Fed has with profitability in ag, we’re still seeing some pretty strong land values. With all that being said, we’re not seeing the increases that we’ve seen in the past couple of years. What I would say is that we’re seeing a flattening of values. There are certain classes of land that we’ve seen drop off both from a value standpoint primarily driven by lack of interest. Those high-quality farms are still selling well. There’s still competition for those, and that’s why they’re holding their value. They’re not increasing unless it’s an outside instance where maybe you have some neighbors competing and they drive the price up a little bit, but nothing like what we’ve seen the last couple of years.”

Shadegg has seen the ups and downs of farmland prices over the last 40 years and admits he’s surprised at how land continues holding value despite significant headwinds.

He says, “We tend to go through a cycle, and it resets at a different level. It is rather surprising that we’re not seeing a more definitive adjustment like coming to a screeching halt. But I think that goes back to the way that people in agriculture have operated the past 25 years, where they went through the 70s and 80s and how tough that was, and they made smarter choices and handled their finances better. And so, there are still some individuals out there with some cash ready to deploy it at the right time.”

During his career, Shadegg has always considered commodity prices as a key indicator of farmland market health. Local farmer-operators continue to be the number one buyer of most available farmland. Shadegg says, “Those investors are definitely in the market. They just haven’t been the final purchaser. However, as I look at what has happened in the past and what could happen here as we move further into 2024, those investors are sitting back and waiting for the opportunity for the right price, for land to hit the right price to meet their ROI. As you have some farm operators that cry uncle and say, ‘You know what, that’s just too much,’ when they step back, there might be an opportunity for those investors to step in. I don’t know that it’s going to be this landslide of investors coming in all at once, but there are still land investors that are looking to purchase land, and they’re just waiting for the right opportunity.”

Looking ahead, there will still be competition over prime farmland according to Shadegg.

He says, “My opinion is that we’ve kind of reached this plateau, so I still think we’re going to see competition for some of these higher-quality pieces of land, and those are going to press the upper limits, but overall, I think we are kind of cresting that plateau, and I anticipate that we’re not going to see things drop dramatically. I think we’re going to reset that new normal.”

Story courtesy of NAFB News Service

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