The land market has been in a state of high momentum since late 2021, and that trend has continued well into 2022. The competition for high-quality cropland has resulted in both record sales and overall increases in land values across the country.
Farmers National Company recently reported a new record sales volume of $766 million during 2022, which exceeds the previous record set in 2021 of $750 million.
The successful buyers of farmland in most cases were traditional local farmer-operators (75% of the time), but land investors are also part of the equation. They have been active bidders at most sales, setting the floor on values. Although the investor may not always be the buyer of land, they are part of the competition driving the values higher. Many investors see the long-term value of farmland, the opportunity to diversify investments, and the value of land as a hedge against rising inflation.
Commodity markets will continue to be the main driver of land value, coupled with the supply/demand scenario. This outlook for continued strong land values remains strong moving into 2023. However, there are potential risks to consider, such as rising interest rates and inflation, which can decrease net farm income, erode operator equity, and subsequently pressure farmland value. Despite these risks, there's no doubt that the current market presents a unique opportunity for both land sellers and buyers.
Farmers National Company notes that our region (Southern High Plains/Panhandle) has seen steady demand for quality irrigated land with quality water production. The demand for dryland and pasture became stale with little to no increase in value for these land classes. The ongoing drought slowed demand in late summer and into the fall months.
In recent weeks, there has been an increase in interest for all land classes with potential sales being favorable into the coming months. With a lack of inventory on the market, buyer interest will increase, and could push sales, although market values do not appear to be increasing.
All this to say-- the current land market is at historic highs. If you're a landowner who has been sitting on the fence about selling a parcel, this isn't a bad time considering the recent price per acre increases. This is a great time to capitalize on the unprecedented demand for land, and take advantage of the strong market values while they last.