The farmland market in 2023 saw some new highs in prices paid for acreage. Randy Dickhut, farmland specialist with Agricultural Economic Insights, says buying land in the new year is going to require more borrowing than it did this year/

“My take is in a lot of parts in the Corn Belt, it takes $3 million to buy a quarter section, and how many $3 million are there lying around in that neighborhood? So, I think there’s going to be in the next round of land buying coming up a little more borrowing of funds, and so that becomes more expensive, and that makes a difference because you’re gonna have to support that payment from other income from the farm. So, higher interest rates, the cap rate expectation, or the return on that farmland that’s going to change, I think.”

He says 2024 is going to look a lot different than the last few years.

“We’ve been used to low interest rates and low Treasury rates where two to three percent return on farmland was acceptable. Now Treasury rates are around five percent. Are they going to go high and stay higher longer? And so, the expectation is I need a better return for that farmland. So, do I get better rent, or does the value come down some? So, I think that may play out, but there’s still a lot of things going on.”

The cost of farming will be a big factor in the farmland market.

“Lower input prices, farm incomes; where were they land? Commodity prices are lower. World uncertainties. The U.S. still has the most stable land market, and so forth, so it’s a place to invest and keep for the long term. But I think you’ll ultimately have some challenges on the farmland prices in 24. We’ll see if it’s just a soft thing. I don’t think it’ll be more than that, but I think it’ll give it another pause.”