Report Snapshot
Situation
Demand for cropland remains resilient in the Midwest and Plains. As investors and producers reassess their portfolios post-pandemic, a central question emerges: Over the long run, how do income support, appreciation and volatility shape inflation-adjusted cropland returns? Meanwhile, farmland values in California are seeing extended volatility and softening. Purchasing land in this environment requires an approach that will tie land values to a property’s ability to generate income.
Finding
Our Midwest and Plains analysis shows markets with stronger real income support tend to navigate down-cycles and tighter credit more smoothly, while appreciation-dependent regions are more sensitive when margins weaken. In California, by using a discounted cash flow approach, buyers can understand the return assumptions required to justify the list prices in their area — an especially useful tool when there’s market uncertainty.
The theme of this issue of “The Rural Economist” is farmland returns. When purchasing cropland, it helps to know what kind of risk you are taking on and whether the investment will depend primarily on income to service debt or on future appreciation to justify the price paid.
The first section focuses on the Midwest and Plains. It can help farmland investors whether they are seeking higher‑return, more cycle‑sensitive exposure or more stable returns over time with less downside risk.
The second section focuses on California, where farmland values continue to fluctuate with ever-growing uncertainty around farm income and water, especially for permanent plantings, which require a large upfront investment. In times of such uncertainty, evaluating the income a property can reliably generate is an important exercise.
Terrain content is an exclusive offering of AgCountry Farm Credit Services,
American AgCredit, Farm Credit Services of America and Frontier Farm Credit.