2024 has primarily been marked by stability and resilience in the land real estate market, following the significant appreciation in land values witnessed in recent years. While the increase in values has slowed in many markets nationwide, the lack of a large-scale downturn in land prices reflects the continued demand for available land across the country.
As buyers and sellers look toward the final quarter of 2024 and beyond, some factors currently influence land values and the real estate market.
INTEREST RATES CUT FOR THE FIRST TIME SINCE COVID
One of the most notable developments in Q3 was the first interest rate cut since the onset of the COVID-19 pandemic. In September, the Federal Reserve lowered rates by half a percentage point—a move that may not significantly affect long-term credit immediately but will have an instant effect on short-term loans in the upcoming month or two.
Farmers can anticipate better rates on operating lines of credit, while residential borrowers could see improvements in their home equity and credit card debts. These aspects are closely tied to short-term interest rates and may begin to improve as soon as next month following these cuts.
It may take longer for consumers to see impacts on other expenses. In January and March, as farmers prepare their operating lines of credit for supplies needed for planting or expanding their herds, they will start to notice the effects of the rate reductions. Hopefully, 2025 will bring a more affordable landscape for agricultural landowners and producers.
The best approach for anyone operating in this environment is to avoid overextending themselves. While rising rates suggest a cautious approach, the current decline provides an excellent opportunity to continue business and borrowing. If rates decrease again in a year, borrowers can always refinance to benefit from those new lower rates.
USDA OUTLOOK SHIFTS
At the start of 2024, forecasts for farm revenue in the US were notably lower compared to previous years, with commodity prices remaining low. Farmers are bracing for reduced revenues in 2024, particularly as input costs remain high. Recent farm income forecasts confirm incomes are expected to decline this year compared to 2023, although some input costs might be relieved.
Recent USDA data indicates a decline in feed costs for cattle, hogs, poultry, and other livestock throughout the year. Similar trends are anticipated for fertilizers, including lime, soil conditioners, and pesticides. Lower costs for feeding and raising livestock suggest farmers may experience slightly improved profit margins in this area.
International trade is predicted to significantly influence crop market strength over the next year, especially for major export crops like corn and soybeans. If international trading resumes, prices for corn and soybeans could see a healthy recovery by 2025.
GROWING DEMAND FOR FARM DEBT
Lastly, expect to see an increase in demand for farm debt from financial institutions nationwide in 2025. As rates become more manageable, more institutions will likely view farm debt as a viable diversification strategy.
