How much is an acre of farmland? | Land Values
What is the price per acre?
As a farmland broker, the #1 most often asked question is some version of “how much is farmland worth?” The answer isn’t as easy as one might think. While, there are methods, factors and multipliers to come up with a value in today’s real estate market, the price per acre inevitably falls into a range.
Factors Affecting Land Values
When it comes to tillable or agricultural farmland, the price per acre generally is a reflection of four main criteria. Location, Drainage, Productivity &
The old adage always holds strong. Location. Location. Location. Farmer/Producer buyers consider location one of the most important factors in determining value. Investors should also consider location in terms of access, rainfall, soils, and more.
Soil productivity is a primary driver in the valuation and appraisal of farm real estate. The 3-Tiers of farmland are Top Quality, Average and Low quality land. In many cases these are graded as A, B, C or D quality farms. Different soil types may have advantages over others for seasonal rainfall considerations and drainage.
Soil drainage affects the health and overall yields of crops. From water on the surface to sub-surface flow, the drainage plays a vital role in the price per acre and farmland value. The term “drainage” can refer to topography, soil type, outlets (ditches, creeks) as well as the subsurface nutrient holding or loss capacity.
Different buyers look at market factors in a variety of ways. Farmer producers analyze commodity markets, futures and expected yields or carryover to determine the price per acre in today’s market. Investors seeking to solidify ROI and returns may factor in how the stock market, bonds or bank CD interest rates are performing vs. cash rent rates of return. Higher expectations tend to drive up the price per acre of agricultural farmland.
Common tools for analyzing and determined farmland prices include inputs, leases, $/WAPI in the local market, just to name a few. Value is really the name of the game for farmland. Consider volatility of stocks, returns on T-Bills and inflation rates. Historically, farm land real estate investments are a great hedge against inflation and part of the successful portfolio.
Agricultural Land Investing
Historical Farmland Yields are Strong & Stable and ag investing is known as a long term, low-risk asset class that provides significant value over time. Some of the pros to farmland investments include:
- Asset Appreciation & Hedge against inflation
- Strong Absolute Returns on Investment
- Stability During Uncertain Economic Conditions
- Low-risk & Low volatility
Landowners with farm assets gain several advantages from passive income (similar to any real estate holding) to portfolio diversification, both of which are key drivers for reducing investment risk and maintaining stable growth of land value wealth over time – particularly during economic downturns.
These factors and many more are important to understand when buying farmland. The price per acre can vary based from county to county, the local market and comparable land sales are important to know.
