December 7, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

After three years of record appreciation with the farmland asset class surpassing a total value of $4 trillion, the third annual National Land Values report released by Peoples Company in April 2023 predicted a leveling out of farmland values. As prices and interest rates rapidly rose, there was an undercurrent that the land market may soften, however, not to the same degree as other real estate.

And indeed, this year’s National Farmland Market Overview report, authored by Bruce Sherrick, professor and director, TIAA Center for Farmland Research, University of Illinois, explains that while farmland values could soften to recalibrate with sustained high interest rates, farmland did what it is meant to do in 2023, and did it well – act as a hedge against inflation. 

As we approach the turning of a new year, 2024 will bring with it dual wildcard factors: a new farm bill being formulated, and a national election – both of which could have unknown effects on how interest rates and inflation fluctuate.

But as the higher cost of capital has had definite effects on some buyers, farmland has shown a resiliency based on its positive correlation with inflation, low or negative correlation with publicly traded equities, annual income, and long-term appreciation, making its power as a portfolio diversifier stronger than ever. 

“Looking forward to 2024, while interest rate impacts other real estate investments we think the limited amount of leverage in farmland investments, lack of publicly traded land, lack of distress in farmland will keep the market on firm footing in 2024,” Steve Bruere, president, Peoples Company, told GAI News. 

Despite some existing short-term pressures, this latest report builds on past reports, taking a slightly longer-term approach. Updated land value data and the examination of influencing factors affecting long-term performance are provided, but the report also turns a lens on new influences and shifts in macro-market conditions to give perspective on recent inflation and interest rates and to provide a foundation for an optimistic outlook for the asset class.

This ability to take a nuanced, long-term approach is due to the scale of history and deep expertise Peoples Company has gained since its humble beginnings in the 1960s when it was launched as the farm management division of Peoples Trust and Savings Bank in Indianola, Iowa.  Since then, the company has grown to become one of the U.S.’ leading land brokerage, management, appraisal, energy management, crop insurance, and capital markets providers. 

In 2018, Peoples Company launched its national strategy, building strong relationships throughout the industry with a coast-to-coast footprint, driving a core business model centering on brokering large-scale, sophisticated land deals, and the acquisition and management of investment-grade assets for institutional investors, family offices, and high-net-worth individuals. 

The scale and scope of its business – working to deploy capital, broker assets, appraise farms, and manage farmland, serving non-operating landowners, large farm operators, farming families, institutional investors, family offices, high-net-worth individuals, and key referral sources, including attorneys, bankers, CPAs, and North American national trust departments across every key agricultural region in the country – gives Peoples Company a decided ability to provide reliable data to compare land values across the country and examine numerous factors impacting the market.

In addition to addressing the key factors impacting the farmland market, including the macro-economic, political, trade, and social realities within which the market is operating, this extremely comprehensive report presents regional updates including historical performance and, importantly, a look at local factors that impact returns for each specific region’s agricultural assets. 

Beyond accessing a wealth of insight on the Pacific West – California; Pacific Northwest; Delta; Lake States; Southeast; Northern Plains; Southern Plains; and Corn Belt markets, this report also includes the following features:

~ Tracking the Performance of Farmland Investments: The National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index – giving an overview of how Q3 2023 tracks compared to the 32-year history of total farmland returns broken down by Total Farmland; Annual Cropland by region; Permanent Cropland by region and type; and by Regional Totals.

~ Evaluating Impact of Transition to “Net Zero” on Farmland Values, by Dave Muth, PhD, capital markets – managing director, asset management, Peoples Company – an in-depth look at the low-carbon energy transition.

~ And Smart Money vs. Scared Money: Reconsidering Farmland in Today’s Market, by Steve Bruere, president, Peoples Company. Having been involved in billions of dollars of land transactions throughout the volatility of the great financial crisis, Ben Bernanke’s quantitative easing experiment, Trump’s trade wars, the COVID-19 pandemic, Russia’s invasion of Ukraine, and the current inflationary challenges, Bruere brings to bear a perspective gained over the course of his 20-year career with Peoples Company.  Concluding, “Smart money stays focused on the long-term impacts of portfolio-wide positions while transacting in the present,” Bruere outlines the historically consistent upsides to farmland investment.

You can gain access to Peoples Company’s latest National Farmland Market Overview Report here.

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