What’s That Worth? A Deep Dive into the Outlook for U.S. Farmland Values from Wells Fargo Agri-Food Institute’s Chief Agricultural Economist

By Dr. Michael Swanson, Wells Fargo Chief Economist (June 17, 2025)

Reprinted with permission from Wells Fargo Agri-Food Institute

When it comes to the balance sheet of the U.S. farm sector, it is only land. Everything else is just a rounding error. The most recent estimate by the United States Department of Agriculture’s Economic Research Service (USDA ERS) shows that 83.6 percent of the agricultural sector assets are tied up in land, with a far distant second being machinery and vehicles at 8.4 percent. Trailing at the back of the pack is financial investments at 3.1 percent, which is why I joke that farmers are allergic to taxes and cash. This absurdly high concentration of balance sheet raises the financial question for investors and lenders: is the current price of land reasonable?

Additionally, there are lots of ways to say that the farmer does not consider financial logic. They need to be reminded that despite what they think, logic should trump emotion when it comes to the market. The following graphs show the relationship between the estimated value of U.S. agricultural ground and the revenues that it produces. Typically, only high-growth, pre-profit companies get priced on their price to revenue as they grow into their maturity. It seems silly to value the oldest economic activity in the world (agriculture) as if it is some speculative new technology. The real reason we cannot assess the income is that we do not have decent tools to measure it. Farmers and ranchers use cash accounting which makes tracking net income hard to quantify. They do not want to show income that creates taxes, and as we mentioned before, taxes are what they perceive to be one of their biggest financial problems. The estimates of gross revenue are more reliable, and if we use them consistently, they should track income over time.

There is a lot of geopolitical history to unpack in these two graphs. Agriculture was the first global economic activity, and it will continue to be intertwined between the big exporters and importers. A few of the players include China, Russia, Brazil, India, OPEC, and the United States. It might be possible to misunderstand, misjudge, or miscalculate something important involving these super complex entities. That would mean that your estimate of farmland values would be wrong. That is a good reason to allow for some allowance of doubt as to the precise value of farmland.

Looking at the first graph should give the investor some pause. The incredible increase in farmland values of the 1970s, which was tied to OPEC and Russia, was followed by an actual decline in the value of agricultural land. The value of land peaked in 1980, and it did not recover that valuation until 1997. To say the least, inflation raged during that period making that decline and stagnation even more painful to the investor.

Since the early 2000s, there have been three periods of sharp increases with no setbacks in valuation which has made farmland investments very appealing compared to the stock market that can lose value very sharply. Those three jumps in farmland value involved ethanol, China, and the Russian/Ukraine conflict along with very accommodative fiscal and monetary policy.

The second graph helps bring out this relationship in a different way. Saying that U.S. agricultural land was worth $1 trillion in 2002, and it is now worth $3.7 trillion does not help anyone’s comprehension. First, anything involving trillions is a scale that cannot be internalized for a person’s daily activity. Second, a quarter century of inflation and technological change makes that historical comparison close to nonsensical. This is where the thermostat approach helps us understand whether the market is hot or cold. The current 2025 estimate for the value to revenue ratio is 6.25 just below 2020’s all-time record, 6.33. For comparison’s sake, the 1980 valuation was 5.29 right before the decline and stagnation of the 1980s and most of the 1990s. Without a doubt, today’s valuation is extremely overpriced on a historical basis.

Is that a forecast of an imminent market correction? Not at all. There are a couple of scenarios where the land market could avoid a major correction. Agricultural revenues could grow rapidly, and land values could plateau allowing the multiple to ease back to more sustainable ratios. The very sharp upward jump in gross revenues pushed the ratio back down to 5.24. The market saw agricultural revenues jump from $411 billion in 2020 to $602 billion in 2022 caused by the global panic around the Russian/Ukraine conflict.

Since then, agricultural revenues have softened to $588 billion, which is still very close to the 2022 record. However, the fiscal and monetary stimulus that set all asset markets on fire also hit the agricultural market. Low interest rates are an economic force of gravity that applies to all assets. Agricultural land values jumped from $2.6 trillion in 2020 to $3.7 trillion in 2025. Another way for the market to get back to more sustainable ratio would be long-term healing with a decade plus of stagnate land prices with slow but steady increases in agricultural revenues. Of course, farmers and investors would prefer the first scenario, and they could deal with the second.

How about all the other negative scenarios? Just consider the following graph showing acreage harvested in the United States versus the rest of the world for corn and soybeans.

Since 2010, the United States has not added any additional acreage to corn and soybean production. The United States harvested 68 million hectares. The rest of the world went from 206 million hectares in 2010 to 282 million in 2024 for acreage harvested. That 76-million-hectare increase is larger than the entire United States production base. And there is more of that where it came from. Additionally, better application of inputs could easily double the productivity of that ground over the coming decades. This really brings home the question of why United States investors are willing to pay such a premium price for United States agricultural ground. At the end of the day, it is about emotional attachment to farmland and ranches. That attachment is not going away, but it will be increasingly difficult to justify financially as this mismatch continues.

Read more ag news, including discussions of economic developments, food and beverage highlights, and the outlook for crop inputs, grain and oilseeds, dairy, protein and much more in the Wells Fargo Agri-Food Institute Quarterly Update.

ABOUT THE AUTHOR

Dr. Michael Swanson is Wells Fargo’s chief agricultural economist. Based in Minneapolis, Minnesota, Dr. Swanson focuses on analyzing the impact of energy on agriculture and provides strategic analysis for key agricultural commodities and livestock sectors. Learn more in this WIA Today Q&A with Dr. Swanson.