Farm Real Estate Values were Steady in 2024

Agricultural real estate values in the Midwest and plains states were flat through the end of 2024. According to Federal Reserve Surveys of Agricultural Credit Conditions, the value of nonirrgiated cropland was generally unchanged from a year ago in most participating Districts. Land markets cooled alongside tightening farm financial conditions and elevated farm loan interest rates. Agricultural credit conditions also deteriorated slightly into the fourth quarter, but financial stress remained limited. The outlook for the farm sector in the year ahead remained relatively subdued alongside narrow profit opportunities for crop producers. However, modest increases in corn prices more recently and pending ad hoc government assistance related to the American Relief Act could support the sector in early 2025.

Fourth Quarter Federal Reserve District Ag Credit Surveys

Agricultural real estate values were flat in most regions through the end of 2023. The value of nonirrigated cropland changed by less than 1% over the past year in nearly all Districts participating in the survey (Chart 1). Reports of land values in the Dallas District were volatile over the past year, with contacts in some areas of the state citing strong recreational and investor demand.

Agricultural real estate markets have softened as interest rates remained at multi-decade highs. Average farm loan interest rates in all Districts declined slightly over the past year, but remained about the average over the past 20-years (Chart 2). Higher interest rates have increased financing costs considerably for farm borrowers and could be particularly challenging for producers with large amounts of debt.

Farmland values have also flattened alongside weaker farm financial conditions. The share of survey respondents reporting that farm income was lower than a year ago continued growing into the fourth quarter in all participating Districts (Chart 3). Profit margins for crop producers were weak through the end of 2024 and finances tightened considerably throughout the year in areas most heavily concentrated in crop production.

Softening farm finances also put gradual downward pressure on agricultural credit conditions. The share of respondents reporting lower farm loan repayment rates continued increasing in all Districts during the fourth quarter (Chart 4). Despites signs of modest deterioration in credit conditions, financial stress in the farm sector remained limited through the end of the year.