Rising input costs and diminishing financial returns are challenging more farmers than ever before, but even as adverse conditions persist, American farmland has retained a record-high value.
On Aug. 6 the U.S. Department of Agriculture released its annual land values report, which showed U.S. cropland is valued at an average of $4,100 per acre in 2020. The figure matches record-high values assessed in 2019 and 2015.
The report also indicated the average value of an acre of Virginia farmland dropped to $4,680, a 0.6% decrease over last year. The slight decline negated a 0.8% increase seen in 2019 when it was estimated the average value per acre was $4,720.
However, Virginia cropland value has sustained a 29.5% increase over the last decade, providing some security to farmland owners during a time of industry uncertainty.
“The stability of cropland value is generally good for farmers,” said Tony Banks, senior assistant director of agriculture, development and innovation for Virginia Farm Bureau Federation. “If farmers own their farmland, stable values will help their equity position and their potential to see returns on investments. If farmers rent, as most farmers do, land value stability should help reduce the potential for volatile swings in rental rates.”
After suffering the nation’s largest decline in farmland rental rates in 2019, Virginia’s cash rentals rebounded with a 5% increase in 2020 compared to a 1% decrease nationally. The rental cost per acre of Virginia cropland is now estimated to be $62, up from $59 in 2019.
Banks noted that commodity prices influence short-term rental rates, offering positive news for Virginia farmers.
With rental rates and farmland value holding steady, Virginia farmers are in an advantageous position to retain their land amid increasing production costs and competition from commercial developers.
“Farmland values make up a large portion of farmers’ equity and can help a farmer obtain operating loans for production or help serve as collateral for future investments,” Banks said.
“For those farmers who own their own farmland, most of them don’t have a 401(k). Their land is their nest egg for their future and for retirement, and if they have family who want to continue farming, it’s the nest egg for the next generation to get going.”
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