Farmland Rental Rates Expected To Increase Further In 2023

Commodity prices have been seesawing since February, in part because of the Russia-Ukraine war. Food prices have been the worst affected so far, with average grocery prices up 12.2% year-over-year this summer. According to August federal data, food prices sparked the highest rise in 43 years in 2022. As Russia continues to weaponize commodities in response to Western sanctions, food prices are poised to rise further in the near term. 

The U.S. Economic Research Service predicts that food-at-home prices will rise between 10% to 11% in fiscal 2022, while food-away-from-home prices are expected to rise in the range of 6.5% to 7.5% over this period. 

Booming Farm Real Estate 

The average value of farm real estate in the U.S. has risen by $420 per acre or 12% year-over-year in August. This number marks the largest dollar value rise since the National Agricultural Statistics Service began its survey in 1997 and the largest percentage increase since 2006. 

Rising Farmland Rental Rate 

Iowa farmland cash rental rates rose by approximately 10.3% year-over-year to $256 per acre as of May 2022. As the United States focuses on raising domestic production amid volatile global food supply, most farmers are working toward expanding their crop production capabilities. Strong corn and soybean prices have been supporting the rental hikes, as tenant farmers across the country are booking solid profits on their yields. 

Farmers’ sentiment has been improving over the past few months, despite inflationary headwinds. This trend is evident from the Purdue University/CME Group Ag Economy Barometer’s 15-point rise in August. Though the rising prices of raw materials remain a cause for concern, Purdue University expects farmland cash rental rates to keep rising through the next year. Jim Mintert, Ag Economist at Purdue University, expects farmland cash rentals to rise by nearly 5% in 2023.

Latest farmland investment insights:

• Two new farmland investment offerings are available this week on the AcreTrader platform. Bucklake Farm, 773-acre rice and soybean farm in Arkansas, is already 59% funded. The offering for Frontier Farm, a 145-acre corn and soybean farm, is set to go live today. Read more...

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