By: Artem Milinchuk, Founder & Head of Strategy at FarmTogether

The USDA’s May 2025 Farm Sector Income Forecast projects that net farm income (NFI) in the U.S. will rise to $180.1 billion, an increase of 29.5 percent compared to 2024. Though just shy of the 2022 record high of $183.6 billion, this sharp rebound marks more than a cyclical recovery — it reflects strengthening fundamentals across U.S. agriculture and reinforces farmland’s reputation as a historically stable, income-generating real asset.

The updated forecast follows two consecutive years of income declines and highlights improving operating conditions, including firmer commodity prices, normalized logistics, and more stable input costs. In a macroeconomic environment still defined by inflation wariness and rate uncertainty, these shifts offer renewed insight into the role of farmland within real asset markets.

Drivers of Income Growth

The projected increase in farm income reflects improved operating fundamentals. Strong global demand and normalized trade logistics have supported firm commodity prices, while yields across major crops have shown improvement. At the same time, input costs—particularly for fuel, fertilizer, and feed—have stabilized after two years of discontinuous price jumps. In part, these developments can be attributed to structural gains in both cost control and supply chain efficiency, contributing to healthier margins across a broad range of producers.

Trends in Land Values

The USDA’s Land Values 2024 Summary reported a 5.0 percent year-over-year increase in average U.S. farm real estate values, bringing the national average to $4,080 per acre. Historically, farm income trends and land value changes have exhibited a positive correlation. Higher net income typically improves operator credit quality and lease performance, both of which support farmland appreciation. Current USDA projections suggest that this relationship will continue into 2025, reinforcing the income–value dynamic in farmland markets.

Historical Return and Risk Characteristics

Long-term return data from the NCREIF Farmland Property Index shows that U.S. farmland produced an average annual total return of 10.15 percent between Q1 1992 and Q1 2024. These returns were generated through both appreciation and consistent income, with relatively low volatility when compared to traditional public equity markets and other private real assets. The index recorded positive annual returns throughout multiple market disruptions, including the dot-com downturn, the 2008 global financial crisis, and the initial economic shock of the COVID-19 pandemic. Farmland’s performance has historically benefited from the biological production cycle and essential nature of food supply chains–characteristics that help insulate its return profile from short-term economic shifts and distinguish the asset class from more demand-sensitive or cyclical assets.

Inflation Sensitivity and Rate Environment

Farmland also exhibits characteristics that are relevant in the current inflation and interest rate environment. Lease agreements in agriculture often reflect broader market conditions such as inflation through periodic rent reviews tied to commodity or cash rental benchmarks. In addition, many crop prices tend to rise in tandem with broader inflationary pressures. Following multiple interest rate hikes by the Federal Reserve in 2022 and 2023, the federal funds rate remains near its peak over the last 18 years at 4.25 percent to 4.50 percent. Farmland’s relatively low leverage–common in direct, owner-operated properties–combined with reliable income streams may help mitigate sensitivity to interest rate fluctuations compared to other capital-intensive real assets.

A Reset in Sector Fundamentals

The USDA’s projection of $180.1 billion in net farm income for 2025, the second highest on record, reflects improving fundamentals across the U.S. agricultural sector and underscores the inexorable consistency of this essential asset class.. The income forecast, when viewed alongside recent land value increases and long-term farmland return data, provides an updated basis for evaluating farmland’s performance and role within a broader real asset allocation. In a macroeconomic environment defined by inflation concerns and elevated interest rate, farmland continues to demonstrate a combination of income stability, capital preservation, and operational resilience.

The content put forth by Global AgInvesting News and its parent company HighQuest Partners is intended to be used and must be used for informational purposes only. All information or other material herein is not to be construed as legal, tax, investment, financial, or other advice. Global AgInvesting and HighQuest Partners are not a fiduciary in any manner, and the reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information or other content on this site.