Limited Supply Drives Strong Demand in Ag Land Market

The agricultural land market continues to demonstrate remarkable resilience, driven by a supply-demand imbalance.

According to Farmers National Company, motivated buyers far outnumber willing sellers, even amid economic pressures like lower net farm income, fluctuating commodity markets rising interest rates and increasing input costs.

Land values have remained stable across the Midwest, with many reports indicating flat or slightly declining trends compared to production expenses. This stability underscores the market's ability to uphold high valuations set over the past five years.

“There are many factors for buyer motivation, but much of it can be explained by mindset translating to demand,” Paul Schadegg, senior vice president of real estate operations at Farmers National Company said.

“Farm operators continue to be the primary buyers of ag land. Their mindset or motivation revolves around reinvesting in their farm enterprise, expanding operations, and utilizing today’s farm equipment fully. Location of land offered for sale also plays a large role in their decision making, as often this land has not changed hands for generations and once sold, may not be sold again.”

Farm operators dominate the market, motivated by reinvestment in their operations, expansion opportunities and the strategic use of modern equipment.

“We anticipate that operating farmers will continue to be the primary land buyer as we move into 2025. Changes in the ag economy will determine if the percentage moves up or down,” he added.

Investors form the second-largest segment of buyers, including individuals, groups and funds.

Their purchases are return on investment (ROI)-driven, often targeting regions with high productivity or undervalued markets. As economic pressures mount, these buyers remain poised to acquire properties that meet their criteria.

“There is virtually no emotional motivation, as buying decisions are based on return on investment or anticipated appreciation of land value. The motivation lies in expanding the portfolio, opportunities in productive regions, and improving ROIs in declining land markets," Schadegg said.

"Many land investors have not experienced the rise and fall of agriculture cycles but fully appreciate the long-term value of land. As pressures on the ag economy increase, investors stand ready to bid on land that fits their investment criteria."

Land listings are down by 25% compared to the active market of 2020-2023. Many landowners retain properties due to their appreciating value and consistent annual returns, further tightening supply.

“Motivated buyers remain in the current land market both as farm operators and land investors ready to deploy available cash to further their operations or portfolios,” he added.

Farmers National Company reported an active fall season, handling $223 million in land transactions through public auctions and traditional listings. With a robust pipeline of auctions planned for early 2025, Schadegg remains optimistic: "The ag economy’s positive signals create opportunities for those in agricultural production."

The agricultural land market, fueled by limited supply and strong demand, remains a dynamic and valuable sector for both operators and investors. As market conditions evolve, the balance of buyer motivation and available land will shape opportunities moving forward.

“Optimism remains moving into 2025, and with positive signals for the ag economy, opportunity will exist for those involved in agriculture production,” Schadegg noted.