Supply and demand control land prices. It’s simple economics. While land listings haven’t been abundant recently (low supply), strong demand for good farm ground hasn’t wavered.

“As the supply for farm ground on the market is approaching more normal levels, and farm profits decline, we’d expect demand to decrease but it’s holding steady which has been good for land prices, keeping them steady,” Karst explained. He expects this trend to continue into the winter months and is looking forward to what that could mean for 2025.

To sum up the past few years:

2022: average supply, high demand with record-setting land values
2023: significant volatility in land values all year long, with overall steady prices due to continued strong demand and below average volume of sales.
2024: overall steady supply, demand and values with weaker prices mid-year but stronger prices in the last six weeks, post-election.

The Year Ahead

“I think the first quarter of 2025 will be telling for what’s going to happen the rest of the year,” he said. “The things to watch will be the commodity prices. We heard in early December that there wasn’t nearly as much corn in the country as they thought so the price went up a bit.”

It was a small drop in a large basin, but corn and bean prices will take anything they can get at this point.

Just like every year, interest rates are a hot topic for Halderman and their clients. If interest rates increase instead of fall, then Karst suggests buckling up for a bumpy ride. Possible changes from this new administration will likely have an impact on commodity prices in the long run. It sounds like new tariffs will greet America’s three largest trade partners: China, Mexico and Canada (source: https://www.forbes.com/sites/antoniopequenoiv/2024/11/25/trump-promises-new-tariffs-on-china-mexico-canada-after-taking-office/)

Keeping a close eye on the Purdue Ag Economy Barometer, Karst has watched farmer optimism skyrocket in the past few weeks. Surveying 400 agriculturalists monthly, the barometer uses a 0 to 200 scale where 100 is considered neutral.

“Back in September, the barometer found that producer outlook for the future was down to 88,” Karst said. “We haven’t been below 100 for any length of time since 2016. It rebounded to 115 in October, but I think that could’ve been a harvest bump. Then in November, that number was 145. It seems that people are hugely optimistic about the future, possibly because of this new administration.”

Comparing this election with that of 2020, respondents to the Purdue Ag Barometer that fall were concerned about increased government control. In fact, 83 percent of respondents shared that fear. Prior to the 2024 election, only 41 percent were concerned about this. After the election, that number dropped to just 9 percent.

“It makes a huge difference when farmers are optimistic about the future and I would say those changes are pretty noteworthy,” Karst said.

Farmers typically rotate their year around four seasons: planting, fixing, harvesting and loan renewal. The later, loan renewal, is in the early stages and things could get dicey.

“All the bankers I talked to in December have said, ‘it’s pretty ugly,’ and those are their exact words,” Karst said. “In the last two years, working capital declined substantially because the cost of production is higher than most income. Farmers are building budgets right now around exceptionally low corn and bean prices and most will be operating in the red or make cuts to stay in the black.”

The last time profitable commodity prices were on the table was in early 2024. Despite these facts, Karst said the sky isn’t falling and he doesn’t expect it to.

“The long-term ag outlook is positive but the next year or so is going to be a little bumpy,” Karst said. “I believe that most farmers are in good shape especially the larger, usually older, operations with big cash reserves and lots of equity. This is when it’s a benefit that most farmers are in their mid-50s, most of those guys are set up for this type of year. It’s the younger ones who might not be as financially healthy so they’re the ones who will suffer the most.”