Where is the farmland market headed early in the new year? Dr. Bruce Sherrick, a professor of farmland economics at the University of Illinois, says a lot of people are interested in that information.

“It’s something that everybody’s fascinated by right now because we came out of a period for the last three years with rapid increases, and then, especially in the latter half of 2024, prices pulled back a bit, and we’re kind of starting to say, ‘Well, where are we headed?’ Is this the beginning of a substantial pullback or not? I think markets are incredibly good at aggregating information, so I think everything makes sense if you look at it carefully. People recognize that farmland is what you can earn from owning it. In some sense, if incomes are higher, the land should be worth more. If your interest rates are higher, the land should be worth less, and farmland has proven itself to be an incredible inflation hedge. So, if inflation is higher, farmland values tend to go up. What will impact it going forward has more uncertainty about it right now than we have had in the last decade or so.”

He talks about what may be some of the bigger influences on the market.

“We have inflation that appears to be higher for longer, according to both the Fed and the stance of financial markets. People recognize that the incoming administration will have changing priorities on renewable fuels or decarbonizing the energy complex, perhaps, and questions around trade policy and tariffs, in particular. At the same time, we didn’t get a farm bill written, but we got an extension, and on top of the extension, we seem to have become comfortable with ad hoc payments again. So, we have another disaster bill or another payment bill in the works. And so, I think this understanding of income used to be based on what you grew in the market, so you could somewhat predict. Now, we don’t know if income is dependent on a trade issue, an extra payment or disaster, a change in the subsidy rate on crop insurance, or any number of things that we used to not have as high on the list of potential problems.”