Finance

Between the 24/7 demands of running an agricultural operation and the blinding pace of our world today, there is little time to sift through all the headlines. The good news is that you no longer have to! Our goal is to point you to some of the most important headlines in agriculture, so you can stay informed on the forces shaping your livelihoods. To save you time, here are the week's top links and news items: Top news 1. From FBN: 4 Financial Priorities for Farmers in March This link highlights the financial priorities to consider keeping top of mind this month. Watch for Interest Rate Changes Following the March Fed Meeting Conduct Equipment Maintenance Before Planting Begins Finalize Your Insurance Coverage Assess the Future Value of Your Farmland 2. What Does the Failure of Silicon Valley Bank Mean to Ag Markets? FDIC records show SVB's failure is the second largest in US history. Companies at risk of losing money in a scenario of higher interest rates and lower returns typically carry high debt loads and earn a low return on assets. The primary concern for the ag markets is that this is the type of event that causes traders to trim their long positions. Corn, soybeans and cattle have large net-long positions held by specs and look vulnerable. Corn prices look the most vulnerable as specs were already stressed by May prices that have fallen 60 cents in the past three weeks. 3. Growth in Farmland Values Slows Amid Higher Interest Rates Farm real estate values increased in 2022 but showed signs of softening during the final months of 2022 as interest rates rose sharply. The average rate charged on agricultural loans increased nearly 150 basis points from the previous quarter and were about 300 basis points higher than a year ago. Rates rose to the highest level since 2008 and pushed up financing costs considerably. Benchmark interest rates surpassed returns to farmland owners in recent months, which could put some downward pressure on growth in farmland values going forward. Capitalization rates, calculated as the ratio of cash rents to farmland values, have decreased continuously over the past 15 years. 4. Texas Supreme Court Rules in Favor of Ag Retailer in Drift Case This recent court case highlights the requirements of farmers attempting to prove financial damage from exposure to pesticides. Demonstrating visual damage is not sufficient in these cases.  Farmers must show what amount of the pesticide reached the crop and whether that amount would reduce crop yields. Expert testimony is required for corroboration, as the farmer's experience is not sufficient. Farmers must show reduced crop yields for the entire area for which he seeks damages. 5. For beef-on-dairy, Angus performs best Penn State is conducting a feedlot trial to determine optimal beef genetics of steers born to Holstein cows. Because the cattle that consumed less feed grew slower, no breed differences existed in feed conversion to gain. Angus-sired steers were heaviest at feedlot entry and were fed at the center for the fewest days. The Angus-Holstein steers reported the best profit/hd. Wagyu-Holstein steers had the worst profit/hd due to inferior average daily gain and dry matter intake, greater days on feed, and reduced carcass weights. Get in touch If you have any links you'd like to share or have any questions, please contact Travis Carlstrom, Sr. Ag Credit Analyst at FBN. © 2015-2023 Farmer’s Business Network, Inc. All rights reserved. The sprout logo, “Farmers Business Network,” and “FBN” are registered service marks of Farmer’s Business Network, Inc. or its affiliates and are used with permission. The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. The information and opinions expressed by others in this material are their own and are not endorsed or approved by FBN or its affiliates. 

Between the 24/7 demands of running an agricultural operation and the blinding pace of our world today, there is little time to sift through all the headlines. The good news is that you no longer have to! Our goal is to point you to some of the most important headlines in agriculture, so you can stay informed on the forces shaping your livelihoods. To save you time, here are the week's top links and news items: Top news 1. From FBN®: Why Did National Farmland Values Increase in 2022? The FBN Data Science delivers data-driven insights on trends related to farmland values. The real mortgage rate is one of the best predictors of farmland value change. Since interest rates were low and inflation high for a big part of 2022, the real mortgage rate remained negative. On average, the farming sector is in an excellent financial position . The debt-to-asset ratio is low, indicating that farmers have used the high net income period to build equipment and financial reserves. 2. USDA Precision Technology Adoption Report Highlights and Analysis This link provides an excellent overview of the recent USDA report, Precision Agriculture in the Digital Era: Recent Adoption on U.S. Farms. Most forms of digital technology have been slowly adopted in the agricultural sector. However, biotechnology has moved at lightning speed in adoption terms . A Hierarchy of Farmer Technology Adoption is developed to show how successfully a technology will be adopted. Farmers slow to adopt technology are typically correlated with smaller farm sizes, lower crop yields, less use of  technical or consulting services 3. Grain Stocks Remain Tight A number of factors have elevated commodity prices in recent years, and this link looks at the tight grain stocks situation. Corn, soybean, and wheat stocks are all below the long-run average in the US . The situation is similar on a global scale.  Any production concerns in 2023 could trigger a dramatic price response. Accordingly, all crops will be bidding for acres going into 2023. 4. Early herd rebuilding could happen through the bred cow market The USDA Cattle Inventory report shows that feeder cattle supplies will be reduced nationally in 2023 . Expected profit margins in the current year will help determine how quickly the herd can be rebuilt. The quickest way for these producers to increase the feeder cattle supply is through the addition of bred cows or bred heifers. Higher feeder cattle prices create incentives for more calves to be brought to market and bred cows are the quickest way to do so. This link also provides a chart for premiums/discounts for bred cows based on expected feeder cattle and corn prices. 5. The Use of Climate Information in Midwest Agriculture: Results from a Farmer Survey This link examines how farmers utilize weather/climate information in their decision-making processes. Most farmers use the short-term forecast in farming decisions, especially when it comes to planting and spraying time, fertilizer application, and hay management. The use of longer-term forecasts are utilized less frequently. The most common use of long-term forecasts is for marketing strategy. 50% of farmers rely on their own experience when making decisions based on climate/weather forecasts.  The other half uses advice from the public sector (University extension) and/or the private sector (Ag inputs supplies, farm advisors, and neighbors). Get in touch If you have any links you'd like to share or have any questions, please contact Travis Carlstrom, Sr. Ag Credit Analyst at FBN. © 2015-2023 Farmer’s Business Network, Inc. All rights reserved. The sprout logo, “Farmers Business Network,” and “FBN” are registered service marks of Farmer’s Business Network, Inc. or its affiliates and are used with permission. The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. The information and opinions expressed by others in this material are their own and are not endorsed or approved by FBN or its affiliates. 

With so many tasks requiring your constant attention as a farmer running a demanding business, it’s easy to put operational to-dos on the back-burner… but these tasks can often be some of the most important and time-sensitive.  Here are a few financial priorities to consider keeping top of mind this month:  1. Watch for Interest Rate Changes Following the March Fed Meeting The Federal Reserve holds eight scheduled meetings annually to examine and adjust interest rates; the next meeting will be held on March 21 & 22.  Following the public announcement of each meeting’s outcome, FBN publishes a recap of interest rate adjustments, future expectations, and actionable perspectives from FBN Chief Economist Kevin McNew. Stay tuned for that post soon on the FBN Blog ! [Click here to catch up on FBN’s recap of the most recent January Fed meeting.] 2. Conduct Equipment Maintenance Before Planting Begins  Before you begin planning your planting logistics and getting out into the field this season, it’s important to make sure your equipment is ready. Prioritizing equipment maintenance and making adjustments to get the best planting results — before you plant every field — pays off in the long run.  Does your planter need to be serviced — or even replaced? Should you consider leasing instead of buying farm equipment this season? Equipment purchases can be a sizable investment. Take the time to consider your options now to avoid potential challenges later in the season.  [READ: 10 Things to Keep in Mind at Planting] 3. Finalize Your Insurance Coverage  If you haven’t finalized your crop insurance for this season yet, now is the time to lock in your coverage — there are only a few days remaining before the approaching deadline. The insurance sales closing date for spring planted crops (such as corn, soybeans, cotton, grain sorghum, rice, spring wheat and spring barley) is generally March 15.  When selecting coverage, make sure you’re securing a policy that’s the right fit for your operation. Having the wrong level of insurance coverage can have an immense impact on your bottom line long term — you could be overpaying on premiums year after year or under-compensating for risk, leaving your operation exposed in difficult years. [WATCH: The FBN Crop Insurance team explains why 2023 is a unique year for crop insurance, how global grain markets are looking for the coming months, and how to select appropriate supplemental coverage for your operation.] 4. Assess the Future Value of Your Farmland  Many things have changed in the farm economy in recent months. Farmland values across the U.S. increased substantially in many regions last year, and even more recently, interest rates increased, inflation seems to be getting under control and farm income reached a record high in 2022 .  But what will happen to farmland prices in the next few months? Will farmland values decrease or increase?  By developing a series of data-based models to gather investigative insights, the FBN Data Science team has forecast its expectations for price changes in 2023 in its latest blog post. Click here to read more.  Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, “FBN Direct”  are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. We are an Equal Opportunity Provider. FBN Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solutions Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan). FBN membership is not required to purchase through FBN Insurance LLC, but certain features may only be available to FBN members. FBN Crop Insurance is currently offered in all U.S. states. Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify. The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.

It’s time to start thinking about planning your farm’s budget. Proper planning ahead of time will help you make major decisions for your operation.  Join FBN ®’s Sunday Mancini as she sits down with TJ Wilson to talk about farm planning and budgeting. TJ Wilson is the Director of Sales for FBN ® Finance. He comes to FBN from a 15 year career in the banking industry working in lending and management roles after graduating from Kansas State University. In addition to working in FBN Finance, TJ is also part of a corn and soybean operation with his family in Northeast Kansas. Farm Planning and Budgeting Webinar Agenda Getting started ( 00:00 ) Projecting your income ( 03:03 ) Projecting your expenses ( 07:17 ) Prepping your balance sheet ( 12:23 ) Financial ratios explained ( 17:35 ) Watch Now: Building a Farm Budget Farm Budget Benchmarking Tools As TJ mentions, there are a number of tools that are produced annually by different universities across the country. A few good benchmarking tools include those below: Kansas State University - https://www.agmanager.info/sites/default/files/pdf/Farm%20Financial%20Benchmarking.pdf University of Illinois - https://farmdocdaily.illinois.edu/2018/09/what-should-my-farm-benchmark University of Minnesota - https://www.cffm.umn.edu/initiatives/benchmarking/ [WATCH: Webinar: Refinancing Your Land Loan: Maximize Savings & Opportunities] Loans from FBN Finance Applying for a loan can sometimes feel like a daunting process, but the loan advisor team at  FBN  Finance is here to help. With an average of 15+ years each in Ag finance experience,  FBN  loan advisors are available to talk you through all facets of the real estate loan process, discuss any questions or concerns you may have and make sure you get the solution that best fits the unique needs of your Ag operation.  Click here , complete the brief form below, or call 866-619-3080 to get started. Audio Transcript Sunday Mancini: Hey everyone, this is Sunday with Farmers Business Network® and we're here today to talk about all things budgeting and financing as we look toward 2022. And TJ Wilson is our expert who will be guiding us through this journey. He is the head of sales for FBN® Finance. So, hello TJ. Let's dive right into it. TJ Wilson: Thanks for having me. Sunday Mancini: Let's get started with the biggest question that maybe everyone has. Why do I need a farm budget? TJ Wilson: I think budgets are important for all farmers as they're looking because the crop year is obviously year to year, so we need to think about what's the next year gonna look like what kind of income are they gonna generate off of that crop or their expenses gonna be, and start building a baseline for what that may look like and help them make some decisions for the next year. Sunday Mancini: Awesome. So going into this budgeting process what information do farmers need to create or update their current farm budget? TJ Wilson: Yeah. The best information to use when creating a farm budget is looking at your historical information. Obviously farmers all have tax returns, you know, look back at what your expenses have been historically, try to build a baseline for what that may look like for the next year. By this time of year, a lot of farmers are already starting to lock in their expenses as well, so they're gonna have a good idea of what their crop is gonna cost them to raise over the next year, and they're gonna know what they're gonna plant what their formal planting attentions are gonna be because they, a lot of them have already bought their seed, so they're gonna have a good idea of what their expenses are. And then when it comes to the expense or the income side of things, just narrowing down, you know, being conservative with what you're looking at, you know, what are you gonna raise? How much are you gonna raise? What are conservative price estimates gonna be? So looking at those types of things, or that's the main information that you're gonna need in building your budget for the next year. Sunday Mancini: Gotcha. And so if they go about sort of creating a plan and they're thinking about it conservatively, how do they set goals for a crop year? TJ Wilson: Yeah, I think it really comes down to each individual operation has different goals. So what is your goal for the year? Is it paying off debt? Is it building working capital? Is it making as much money as you possibly can? Is it taking risk off the table? So you know, based off of what your goal is for your operation sitting down and com, coming up with a budget that will build around those goals and help accomplish that. So looking at it from the standpoint of, you know, knowing what your revenue that you want, what your income is that you want to accomplish, what your goal is, build a conservative estimate both from the income and expense side of things to try to build in those types of baselines for yourself. You know, a lot of operations, you wanna make sure that you're conservative in what your expense approach is gonna be to make sure that you've built in enough cushion to, you know, handle the unforeseen situations that we've seen over the last few years. There's a lot of volatility in the ag space, especially on the income side right now. So building in a good cushion for yourself and building in a lot of leeway for your operation to be successful is the utmost importance. Sunday Mancini: Gotcha. Awesome. So let's take a minute to sort of look at projecting income for farmers. So as they look toward 2022, what are the some of the key components of projected income? TJ Wilson: Yeah, the, the key components they're gonna look at is basically the crop insurance information. So most operations have an average yield or an APH that they look at for crop insurance purposes. You know, when you're building a projected cash flow, use that APH information as your average yield. So I would set that as your baseline your under your straightforward main budget plan. And then on the pricing side of things, you know, use conservative estimate there. Obviously we have crop insurance prices that are set in March. But use the December planning prices or whatever those planning prices is are for the crop that you're gonna grow and build in a little bit of cushion off of that, discount it a little bit to make sure that you have some cushion for that volatility that's in the market and use that yield in that price estimate to build in those types of scenarios. TJ Wilson: Obviously government payments is another key item that a lot of farmers are have kind of grown used to over the last few years. Typically, when I'm helping prepare a crop budget, I do not utilize government payments whatsoever. You can't count on 'em, you never know what they're gonna do year to year. So build that budget off of what your actual crop intentions are gonna be in what you expect to grow that year. So those are pretty important when building that. And then on the flip side of that, I typically build one or two other budgets as well on the income side of things. You know, build a revenue plan based off of, you know, what you actually expect to grow from a yield standpoint with some good prices and then go the other direction, you know, what does a crop insurance price look like for yourself this year? You know, if you have a disaster crop and you have to live off a crop insurance, how does that affect your budget overall so that you know, both ends of the spectrum or what you're gonna deal with. Sunday Mancini: Yeah. Awesome. So looking at those benchmarks how can farmers use benchmarks to evaluate their projected income? TJ Wilson: Yeah, obviously this is the, the budget is a tool year to year. And it's not a one and done thing at the beginning of the year when you're making your budget plan. So most farmers should adjust that budget throughout the year and use it as a tool to help guide their decisions all year long. Mainly their marketing decisions, that's an important item for them or their other purchasing decisions if they have the ability to prepay, you know, how does that look like compared to last year, you know, what were those prices last year? How did that fit into their budget and how to affect their budget overall from a breakeven standpoint on their crop? So utilizing that all year long. And then looking at it from year to year, you know, when you did your budget last year and versus this year, what were those comparisons? You know, what was your breakeven difference? Where did you spend more last year than you plan to spend this year? So using that historical information going forward is just gonna help you be a sharper operation. Sunday Mancini: Awesome. so as far as, this is sort of a fun question to, to wrap up this segment, but what steps can I take and what steps can farmers take to improve their 2022 income? TJ Wilson: You know, farmers are doing everything they can right now to try to, you know, limit as much risk as they possibly can. Right now, that's the biggest challenge is the volatility in the risk in the market. So a lot of farmers are trying to do what they can to limit the downside. So what they can do right now is continue to use any risk management tools they have available to 'em. You know, obviously crop insurance whether that's multi peril revenue protection or whole farm insurance are two options that at least limit the downside for operations. Also, working with a team of advisors, you know, whether that's your agronomic advisors, your crop insurance agent, your lender or banker, any financial advisors that you utilize in addition to your marketing advisor. So it takes a team to run a farming operation right now. TJ Wilson: And especially in the volatile times that we're in right now, it takes all hands-on deck and a lot of intelligence farmers have enough on their plate to have to deal with every day and managing their operation. That bringing in some experts will definitely help limit the downside of that operation. And looking at where you're at day-to-day with the ups and downs in the market and the ups and downs of the expense side of things with all the inputs, you know, reevaluate once a month you know, see where your operation is, see where your marketing plan is, see how your budget has adjusted based off of what's going on in the market today. Sunday Mancini: All right. So as we sort of look at projecting expenses for farmers as they approach the next year what are some of the key components of projected expenses? TJ Wilson: Yeah, on the expense side of things, that's a little bit, you know, where we're at right now, that's the hot topic. So expenses continue to rise across the board. I know we did a supply chain video here last week, I believe that talked a little bit about the supply chain and what's, what's causing some of the increase in the expenses and when that may end. It doesn't sound like that's in sight anytime soon. So when you're looking at the expense side of things, you know, two, I always say, or one, I always say, guess high. You know, if you're gonna make an estimate, always, you know, build in plenty of cushion when you're looking at that. Make sure that you handle your, your key components to your operation. You know, the seed, chemical fertilizer, those main inputs that you have to go out and buy every year, and you have to deal with on an annual basis. TJ Wilson: So make sure that you lock those down. As far as knowing where those prices are obviously rent is another big component there if you have to rent ground knowing what your land costs are. So when you're looking at that by this time of year, a lot of people have their prices locked in or have a very good idea of what they are. So use those actual expenses and use a little bit of cushion for overage that you may have if you don't have it on already. Or you have to make any in-season decisions to, you know, add some fertilizer to those crops and try to increase that yield. So looking at those types of things, make sure you're building a little bit of cushion there. Also look at, you know, starting with what you have last year, you know, what did you spend on chemical? TJ Wilson: What's that gonna look like compared to this year? You know, what did you exp spend on repairs last year? Fuel everything across the board. As I mentioned earlier, you have the tax returns. Use those as tools when you're building your budgets going forward. Both on the income and expense side of things. So the other thing that a lot of farmers don't take into account while they're looking at their budgets and don't build into their cashflow budgets going forward is their equipment costs their equipment costs and their overhead. You know, you want to get paid for your work. You know, the farmers wanna make sure that they make a return for their time and their effort. Make sure you build in enough cushion so that you get a return to management for your operation or return to land that you own already. You wanna make sure you're generating a return for that and figuring your depreciation costs. Obviously you're figuring in fuel and repairs, but are you figuring in what the cost is to replace those pieces of equipment? They're not gonna last forever. So make sure you're building in some cushion there and building in plenty of wiggle room for yourself and your operation to be able to expand and make the decisions unique going forward. Sunday Mancini: What benchmarks should farmers use to evaluate their projected expenses? TJ Wilson: Yeah, there's a number of tools out there. So there's a few universities that have reports that come out annually that kind of talk about what the expenses are in the market for different parts of the operation. And then when you come looking at a number of other things, use yourself as a benchmark, you know, what have you done historically? You know, what are, what have your operating expenses look like year over year? How do those compare to this year? And then utilize the, the team advisors that we talked about earlier. You know, how does that compare? Talk to your lender, talk to your banker, talk to your seed rep, your agronomic advisors, you know, whoever you're working with, and figure out what the norm is. You know, am I paying too much for this type of stuff? You know, what's normal in the market? What's it been historically? Do I need to adjust my rates? You know, things like that that you want to take into account to make sure that you're meeting the budget criteria that you set for, and that you, you can accomplish the goals that you wanna reach for. Sunday Mancini: Awesome. And so, you know, this is a question I think that everyone can relate to. What steps can farmers take to reduce their 2022 expenses? TJ Wilson: Yeah, obviously that's a, a big challenge this year with the increase in prices that we're gonna look at, but this is more of a long-term topic as well. So what can you do year over year to be able to reduce some expenses? When you're looking at building these things, obviously there's always a lot of fat in anybody's budget that they wanna make sure they build in. So build a budget that works build a budget that make sure it has enough cushion and it still works, you know, if, if you're guessing your expense is high. And then figure out throughout the year are there things that you can make adjustments on. Obviously, you know, the agronomic advisors out there they're gonna have a lot of information on whether that's variable rate applications variable fertilizer, variable rate seating, things like that, that will reduce costs overall. TJ Wilson: So those are definitely things that we need to be considering. Things that you need to be talking to your advisor team about to build in ways to reduce your costs reviewing your, your rental agreements if you have them out there taking a look at those, are there things that can be adjusted so that they're fair to both you and the landlord? If you rent ground and just looking at little pieces of your operation, obviously repairs parts, everything goes into that operation, everything goes into that budget to be able to cut back certain expenses. It's not gonna be one major expense item that somebody can cross off their list when it comes to the, the agriculture operations. It's a lot of little things that you have to make adjustments on. Sunday Mancini: Yeah. Awesome. so another component for budgeting is the balance sheet. So can you give us an overview of that? What is a balance sheet for farmers? TJ Wilson: Yeah, obviously, you know, the cash flow is, is one part of your operation. When you're looking at that, you know, that's what you're looking at from year to year. You know, am I gonna make money or am I gonna lose money on this next year's crop? And how am I gonna do that? When you're looking at a balance sheet, that's a look at a single point in time where you're looking at your overall financial health of your operation. So the balance sheet is gonna be a collection of all of your assets and all of your liabilities, everything you own and everything that you owe. So when you're doing that, you're gonna build it in three different scenarios. So you're gonna have what we call the current section of that balance sheet, which is assets and liabilities that are gonna be, you will either liquidate or that you will have to pay within the next 12 months. TJ Wilson: The next section of that balance sheet is gonna be the intermediate section, and that's gonna be the same thing, assets and liabilities, but that's gonna be more anything from 12 months up to around seven years. Depending on the type of operation it's gonna be assets that have about a useful life, life of seven years. A lot of that's your cattle and equipment. The type of things that sit in that section of the balance sheet and vice versa. On the liability side, it's gonna be, you know, debts that have to be paid over that time period. A lot of it's term cattle loans, equipment loans sometimes pivots and things along those lines. Vehicle loans that you're gonna be paying on. The bottom section of the balance sheet is what we call the long term section. It's gonna be long term assets and liabilities. TJ Wilson: This is mainly just real estate. So you know, we have a real estate, we have any other long-term assets that we own, whether that's investments or, you know, retirement accounts or things like that that farmers have versus mainly just real estate debt. So that's gonna sit on that long-term section of that balance sheet. You know, on the current section back to that, you know, that's gonna be really your inventory, your cash so things that you're gonna be liquidating in the next year, whether that's prepaids or accounts payable on the liability side. So anything that you owe your vendors that you have to pay in the short term. Sunday Mancini: Awesome. And as sort of they, the farmer may itemize the different things that they'll need to include in the battle sheet, what should they include? TJ Wilson: Yeah, absolutely. So be as thorough as you possibly can. So obviously we want to include everything. It's a true picture of your overall financial health and it is a tool that we can look at year over year. I would highly recommend when you're preparing these balance sheets, try to do it the same time every year. I know a lot of operations when I'm working with my customers, I try to sit down and do it January 1st. I encourage them, you know, if they sit down, they're watching football games on New Year's Day you know, try to look at your balance sheet a little bit and sit down and do that while you're watching football. Now that way you have it timestamped and it's the same point in time every year and it's gonna be a good tool for you to be able to measure your success year over year. TJ Wilson: So when you're looking at what to include, include everything you possibly can you know, be realistic about what you're including though you know, make sure you have accurate inventory numbers, make sure you have fairly accurate debt numbers. You know, try to include, you know, what do you owe who do you owe it to what are the interest rates? It's just a good review for every operation on an annual basis to sit down and look at, Hey, make sure I have my bearings about me. I know what kind of assets I have, I know who I owe what to when it's due and how much is due because you're gonna use a lot of the components out of that to help build your budget for the next year as well. So obviously when you're including your budget, you're gonna include what your debt payments are and any expenses that you have due over the next 12 months so that you can make sure you have an accurate representation of what that operation looks like. Sunday Mancini: Why is it important? What value do farmers see from it? TJ Wilson: Yeah, absolutely. So I mean, farmers, you know, are, are tricky individuals when it comes to, you know, the way you're looking at their overall financial health. So farmers are a lot different than other businesses. Other businesses operate on, you know, the shorter sections of their balance sheet where it comes intermediate liabilities, they have a lot of machinery, they have a lot of cash and inventory. Farmers cash and inventory does, it's out there. They use a lot of it because obviously they grow a big crop. But farmers balance sheet typically lies towards the bottom side. A lot of 'em have a lot of long-term assets. Farmers are always, you know, real estate rich cash poor. So, and that's the common saying out there. So their savings account is their real estate, and so making sure that you've got enough equity in your balance sheet should you need to tap into that ever is a good tool to measure on an annual basis and especially with the volatility that we're seeing right now. TJ Wilson: So are there things in, in your balance sheet that you need to be thinking about and planning for? Just like we talked about with your goals earlier on? You know, what do you want to get your balance sheet to the point of what are your goals long term? Do you want to hand real estate down to your kids? Do you wanna build a operation for the next generation? Do you wanna retire the next five years? What does that look like? And so looking at your balance sheet is a good gauge and tool to tell you whether you'll be able to accomplish some of those things going forward. Sunday Mancini: Awesome. That's great. And I feel like helpful even for me. Maybe I need to start budgeting myself. Awesome. So I wanna talk through some terminology that I certainly would love to learn more about. And that is financial ratios. So I'll go through some of those terms and, and hopefully learn something myself. Starting with a current ratio. What is it, what is its implications? TJ Wilson: Yeah, we talked about the current section of your balance sheet a little bit bit ago. So that's gonna be that top section of, you know, the, the inventory and liabilities that are all due within one year or can be liquidated in one year. So what does that ratio mean? What does it look like? So basically it's just your current assets over your current liabilities. So do you have more current assets than you have current liabilities? That's the key component right there. So we call that the working capital position and the current ratio. So typically we wanna see a current ratio, obviously over one. We wanna make sure that you have more current assets than you have current liabilities so that you have enough inventory, cash or anything on hand to be able to pay all your debts that are due within the next year. TJ Wilson: So obviously with the, the farmers, they have an annual crop, so they're gonna be generating cashflow all the time when it comes to that thing. But is there any point in time where they do not have enough on hand to be able to pay what they owe the next year? So that's something that a lot of lenders and a lot of bankers sit down and look at. That's a key component when they're doing their analysis. So obviously the higher the number, the better. You know, the general guideline is, you know, about 1.25 to one. So we want to make sure that you have, you know, at least 25% more assets on hand than you have of any liabilities due in the next year. So this is, you know, major cushion. It allows a lot of operations to do things they need to do on an annual basis with the, what we've seen in the the volatility of the input prices this last year, being able to react quickly when you get the opportunity to buy something that you feel is a fair price or that you've been offered to make sure that you can take having that cash on hand or having a good working capital position allows you to do those things. TJ Wilson: So farmers need to definitely take a look each year what is their working capital position. That's a key component they wanna look at when they're doing their balance sheet and doing their cash flow on an annual basis. So if you do have times like we see right now where you have high input expenses and you might see a negative cash flow over the next year, that's not the worst thing in the world as long as you have enough working capital to survive. You know, farmers have been through tough times, they've been through tight times. Do they have enough equity on their balance sheet and enough working capital on hand to be able to to stomach a tough year. Sunday Mancini: Gotcha. so what is a debt to asset ratio? TJ Wilson: Yeah, the debt to asset ratio is very similar to the current ratio, but it takes the entire balance sheet into account. So how many assets do you have versus how many liabilities do you have? So looking at do you have more assets than you have liabilities? Most farmers do, obviously they have a lot of, you know, high dollar assets with the real estate and the equipment that they have on hand. So what does this balance or this ratio really tell us? It tells us what the viability of that operation is long term. So if you have plenty of equity in your balance sheet you can stomach a tough year or two, you know, you have the ability to work through any tough times that come ahead. And it means that you're basically building your retirement account. So the more equity that you have in that operation the more flexibility it gives to your operation the more viability it gives to it long term and gives you a lot of options to do what you want to do, do, whether that's, you know, accomplish your goals, buy real estate, look at a number of different things that you're trying to do going forward. TJ Wilson: And it really tells a picture of the financial health of the operation. Sunday Mancini Awesome. Well I really appreciate you going through and answering all these questions for us. This has been super helpful and informative. But where can farmers learn more about financing through FBN? TJ Wilson Yeah, absolutely. So I mean, we have our website, fbn.com slash finance, so that's where they can go to our finance page, learn about the other products and services that we have available. And we have a team of lenders standing by ready to talk to any farmer or operator that wants to, to go through some of these scenarios. We've got a very skilled team very experienced to be able to talk through a number of these scenarios and work through balance sheets and budgeting questions that these farmers have on an annual basis. Sunday Mancini Awesome. Well thank you so much TJ, and this was great. TJ Wilson Thanks Sunday. Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, and “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc.  Terms and conditions apply. Land financing offered by FBN Finance, LLC, provided in connection with Farmer Mac and our underwriting partners, and is available only where FBN Finance, LLC is licensed. To qualify, a borrower must be a member of Farmer’s Business Network, Inc., and meet the underwriting requirements of FBN Finance, LLC and its lending partners. All credit is subject to approval and underwriting. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify

Between the 24/7 demands of running an agricultural operation and the blinding pace of our world today, there is little time to sift through all the headlines. The good news is that you no longer have to! Our goal is to point you to some of the most important headlines in agriculture, so you can stay informed on the forces shaping your livelihoods. To save you time, here are the week's top links and news items: Top news 1. From FBN: Forecasting 2023 Farmland Values: Will U.S. Land Prices Decrease This Year? How will the increase in interest rates, inflation, and farm income affect land values going forward? FBN's data science team identified two main variables that correlate well with farmland values; when combined, the correlation is even stronger. Aggregate Farmer Savings captures the effect of farmers saving their income, and it has a lag effect. Last year this measure increased. The Real Mortgage Rate reflects borrowing incentive and alternative expected returns. This measure decreased in the last year. The changes in these two measures suggest that additional increases in farmland values can be expected. 2. Farm Debt Concentration and Repayment This link takes a look at which farms hold the majority of farm debt and their ability to repay that debt.  The three largest segments of farms account for 22% of all farms and 80% of farm debt. So, a small share of farm businesses hold a disproportionate share of the sector debt. The debt repayment capacity utilization ratio considers how much of a farm’s annual debt repayment capacity is being utilized. Despite accounting for the majority of sector debt and having higher payments, the repayment burden of larger farms is not as burdensome as it initially seems.  3. RP vs. RP-HPE Insurance Decision: Premium, Cash Flow, and Forward Contracting This link explores the decision between RP, crop revenue insurance, and RP-HPE, crop revenue insurance without the harvest price option (HPO) . RP-HPE has a lower premium and thus a lower cash outflow for premiums since it does not have HPO.  The premium subsidy however favors RP as does forward selling. This analysis suggests RP is a better insurance choice than RP-HPE for farmers who have sold or expect to sell before harvest more than 10% of corn and soybean production If forward selling is less than 10%, RP-HPE may be an option to consider.   The analysis completed prompts a policy question, “Would an insurance product specifically designed for forward selling risk be a better option than RP?”  4. Soybeans Not 'Bidding' for Acres Because They Don't Have To As planting season approaches, many farmers are paying attention to soybean-to-corn price ratio for an indication of which crop will produce higher levels of profitability. Based on expected crop insurance prices, the soybean-to-corn price ratio is historically low at only 2.31-to-1 , which suggests that soybeans are underpriced. However, a major reason for this is the relatively high price of fertilizer.  When fertilizer prices are relatively high, corn must bid aggressively in the "Battle of Acres." One potential reason the soybean-to-corn price ratio may be low in 2023 is that the soybean market can already feel assured of ample acreage. The key to the acreage battle will be the price of fertilizer.  The price of fertilizer can be volatile, especially with the current geopolitical situation. 5. Supreme Court May Soon Announce Prop 12 Decision; Here's Why All Producers Should Care The California law being challenged bans the sale of pork within the state unless pregnant pigs are allowed a specific amount of space. The measure was approved with more than 68% of the vote as part of a 2018 ballot initiative known as Proposition 12. Farm groups say the measure violates the "dormant commerce clause", a doctrine that says the U.S. Constitution limits the power of states to regulate commerce outside their borders. If the Court rules in favor of California, the legislation will open a door to a much larger arena of regulatory authority. If this happens, it would potentially allow each state to set its own standards on any and all products that come across state lines. Get in touch If you have any links you'd like to share or have any questions, please contact Travis Carlstrom, Sr. Ag Credit Analyst at FBN. © 2015-2023 Farmer’s Business Network, Inc. All rights reserved. The sprout logo, “Farmers Business Network,” and “FBN” are registered service marks of Farmer’s Business Network, Inc. or its affiliates and are used with permission. The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. The information and opinions expressed by others in this material are their own and are not endorsed or approved by FBN or its affiliates. 

Many things have changed in the farm economy in recent months. Interest rates increased, inflation seems to be getting under control and farm income reached a record high in 2022, though it is expected to decrease in 2023 .  How will these factors affect farmland values in 2023?  How FBN® Data Science Calculates Changes in Farmland Values  The FBN Data Science team regularly builds data-driven models to forecast future farmland values. While they don’t necessarily guarantee a specific outcome, these models help us: Identify the key drivers that determine farmland values Understand where those key drivers stand now Predict how these key drivers may affect future outcomes After testing multiple approaches, our team identified two main variables that correlate well with farmland values; when combined, the correlation is even stronger. These two key drivers are Aggregate Farmer Savings and the Real Mortgage Rate. [Why did U.S. farmland values increase in 2022? Learn more from the FBN Data Science team by clicking here.] Key Drivers of U.S. Farmland Values Note: Red lines show the 2023 predictions for both variables. All data reflects Illinois specifically.  Charts provided for illustrative purposes only. The analysis below is developed using data from the state of Illinois, one of the most functional and developed farmland markets in the country, and it is used as a proxy for the broader agricultural sector. Key Driver 1: Aggregate Farmer Savings The Aggregate Farmer Savings figure is calculated using net cash income data from the USDA Economic Research Service (USDA-ERS) . This figure captures the effect of farmers saving their income and using it to purchase land in cash or as a down payment for a loan.  Logically, if net cash income is higher, then savings are higher — this creates pressure on farmland, raising the value of property assets.   Rather than using just the previous year of net cash income, we determined the best predictor was to use the change in cumulative net income over several years; we refer to this as "farmers savings change."  This variable has a correlation with farmland value change of 0.7, which is high in statistical terms. Net cash farm income has been high in the last two years, and it is predicted that the lag effect of this will manifest in 2023 farmland values.  Using Illinois as an example, farmers’ savings changed by 13.1% in 2022, which translates into a 14.8% expected increase in farmland values for 2023.  Key Driver 2: Real Mortgage Rate The "Real Mortgage Rate" is calculated by subtracting the inflation rate from the actual 30-year mortgage rate.  For the 2023 forecast, we consider that the 30-year mortgage rate in June 2023 will be 6.7% , while annual inflation will be 5.3%. This means that the real mortgage rate will be 1.4%. This reading is higher than last year’s negative calculation, but it is still low in historical terms.  The Real Mortgage Rate has a correlation with farmland values of -0.57. This negative number indicates that when the real mortgage rates increase, farmland values decrease, and vice versa.  Using Illinois as an example, the Real Mortgage Rate calculation for the 2023 forecast translates into an expected increase in farmland values of 7.2% this year. Low mortgage rates encourage two main behaviors:   Increased borrowing and investing (since the cost of money is lower).  Increased interest in assets like stock and real estate, fueled by low rates for alternative investments, like bank CDs or bonds. Relatedly, low economic interest rates increase the present value of future cash flows, which is a valuation methodology used for farmland and other assets. As a result, this increases the price that an investor is willing to pay for farmland. Looking Ahead at 2023 Farmland Values  Putting it all together, we have these two drivers that represent different behaviors.  Key Driver 1, Aggregate Farmer Savings , reflects savings that usually are used to buy land or equipment, and it has a lag effect, from one year into the other. Last year it increased, which appears to add pressure to this year's farmland values.  Key Driver 2, the Real Mortgage Rate , reflects the borrowing incentives and the alternative expected returns in the economy. This variable is lower than last year, but it still indicates a likely positive increase in farmland values.  With these calculations in mind, the best predictor for the Illinois land value changes is the average of these two predictions, with a combined correlation of 0.7. This results in an expected increase in Illinois farmland values of 11% for 2023.  Important Note on Forecasting As noted above, this is a prediction based on historical data. There could be unexpected events that change the normal behavior seen in the sector and the economy. We recommend investors consider their own expectations when analyzing farmland investments. To see recent land sale trends in various states, check out our latest state farmland valuation series: Read the Illinois analysis here. Read the Iowa analysis here. Read the Minnesota analysis here. Financial Solutions from FBN Finance Interested in acting now to expand your ag operation? FBN Finance has a wide range of available financing options and a team with deep ag finance expertise standing by and ready to help you take the next step. Connect with an FBN financial advisor to discuss land financing options today by clicking here , completing the short form below, or calling 866-619-3080. Resources Farmland values are “land and buildings values” from the “June Area survey”. USDA Quickstats (1960-2022). Nominal mortgage rate is from the Saint Louis Federal Reserve data center (1960-2022). Inflation rate is calculated based on the Consumer Price Index (CPI) from the Saint Louis Federal Reserve data center (1960-2023). Mortgage rates are from the 30-Year Mortgage Rate from the Saint Louis Federal Reserve data center (1960-2023). Net farm income used for calculating farmers savings refers to the farm sector as a whole. It is calculated by determining the gross value of goods and services generated by farm assets and subtracting the expenses incurred during the year. We calculated the mean of the previous three years' net-income per acre. Obtained from ERS https://www.ers.usda.gov/dataproducts/farm-income-and-wealthstatistics/ Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify. The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. 

Executive Summary The price of farmland in Illinois grew 25% year-on-year, commanding more than $10,300 per acre. This follows a 5% increase in 2021.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  These increases were primarily driven by growth in farmer savings over the last three years fueled by high commodity prices, increasing government payments and low-interest rates. These low-interest rates also enabled farmers to obtain larger loans to purchase more land, adding pressure to land values and creating competition for farmland coming to the market. [READ: Forecasting 2023 Farmland Values: Will U.S. Land Prices Decrease in 2023?] Why Are Illinois Farmland Values Important?  Farmland is an essential asset for most farmers in terms of value and importance for their long-term success. At FBN®, our team of data scientists and appraisers puts Farmers First® by continuously monitoring the farmland market to provide transparent, timely and actionable insights. We believe that delivering trusted reporting is essential to creating a better farmland marketplace that’s more fair for farmers — whether buying, selling, or refinancing. This report delivers data-driven insights on trends related to Illinois farmland values by exploring:  Why farmland values increased nationally in 2022  Broad, state-level trends in transaction values and sales volume A detailed analysis of each of the nine United States Department of Agriculture (USDA) agricultural districts in the state. [READ: Why Did National Farmland Values Increase in 2022?] Trends in Illinois Farmland Values Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Illinois. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel. Soil Quality Impacts Soil quality is one of the main drivers of farmland values. In Illinois, the Illinois Soil Productivity Index (ILPI) is a widely used index for rating the relative quality of the soils. Using the ILPI, we categorize Illinois's farmland parcels into three soil quality levels, each of them representing an equal total area. (See Methods section at the end of this post for details about the limits for each soil quality class.)  Because different districts have different average ILPI scores, a different proportion of each of the three soil quality categories is represented in the area. To determine the year-on-year change in value, we compared farmland values from the last six months of 2021 with the same period in 2022.  At the state level, the soil quality with the most significant percentage change was the High class, with 26.0%.  On the other end, the soil quality with the lowest change in price was the Low class, showing a 16.0% difference.  Regional Land Value Growth  Land values increased in all nine districts. The largest percentage changes were in the East Southeast and Northwest districts, with 34.4% and 31.7%, respectively. The Southeast and Southwest districts saw the smallest percentage change, with 17.6% and 7.2%, respectively. The highest average land values were observed in Central Illinois, at $13,290 per acre. The lowest average land values were seen in Southeast Illinois, at $5,240 per acre.  Transaction Volume  Transaction volume was low compared to previous years, being ranked as ninth, out of the last thirteen years. The total area sold was 40.0% lower than the previous year (2021) and 4.8% lower than the last thirteen years' average (2010-2022). Summary  The price of farmland in Illinois grew 25.0% year-on-year, commanding more than $10,300 per acre.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Illinois. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel.  [Curious about trends in other states? Check out the Iowa Farmland Values Analysis or review the Minnesota Farmland Values Analysis .] Trends by Region: Central Illinois The Central region is 73.6% cropland and 5.1% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 11,441 ac were sold in Central IL in the last twelve months. This compares to an average of 10,544 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 4,048 ac (35.4% of total annual sales).  Central Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 71 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 52 $/bu. For soybeans, those values were 225 $/ bu and 161 $/bu, respectively.  Central Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the ILPI of the parcel by 195 $/ILPI and subtract 12,995 $/ac. The result is the estimated value of the parcel in $/ac. Boxes show the distribution of yields. The bottom of the box is the lowest 25% yield, the central line is the median (50%) yield, and the top of the box is the 75% yield. The bottom of the horizontal line is the 10% yield and the top of the horizontal line is the 90% yield. Central Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Central Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: East Illinois The East region is 83.7% cropland and 3.6% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 14,798 ac were sold in East IL in the last twelve months. This compares to an average of 15,201 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 4,828 ac (32.6% of total annual sales).  East Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 75 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 35 $/bu. For soybeans, those values were 238 $/ bu and 111 $/bu, respectively.  East Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the ILPI of the parcel by 219 $/ILPI and subtract 17,556 $/ac. The result is the estimated value of the parcel in $/ac. East Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for East Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: East Southeast Illinois  The East Southeast region is 65.8% cropland and 6.9% grassland/pasture. The primary crops grown are soybeans and corn.  In total, 8,549 ac were sold in East Southeast IL in the last twelve months. This compares to an average of 13,293 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,113 ac (36.4% of total annual sales).  East Southeast Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 62 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 44 $/bu. For soybeans, those values were 195 $/ bu and 138 $/bu, respectively.  East Southeast Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between ILPI and farmland value. The R2 is 0.17, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. East Southeast Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for East Southeast Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: Northeast Illinois  The Northeast region is 45.8% cropland and 6.4% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 10,007 ac were sold in Northeast IL in the last twelve months. This compares to an average of 8,024 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,275 ac (32.7% of total annual sales).  Northeast Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 66 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 45 $/bu. For soybeans, those values were 220 $/ bu and 148 $/bu, respectively.  Northeast Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the ILPI of the parcel by 170 $/ILPI and subtract 11,473 $/ac. The result is the estimated value of the parcel in $/ac. Northeast Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Northeast Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Northwest Illinois  The Northwest region is 66.7% cropland and 9.1% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 17,569 ac were sold in Northwest IL in the last twelve months. This compares to an average of 15,648 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 5,976 ac (34.0% of total annual sales).  Northwest Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 68 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 36 $/bu. For soybeans, those values were 231 $/ bu and 118 $/bu, respectively.  Northwest Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the ILPI of the parcel by 157 $/ILPI and subtract 9,540 $/ac. The result is the estimated value of the parcel in $/ac. Northwest Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Northwest Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Southeast Illinois  The Southeast region is 49.4% cropland and 12.0% grassland/pasture. The primary crops grown are soybeans and corn.  In total, 7,305 ac were sold in Southeast IL in the last twelve months. This compares to an average of 4,831 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,044 ac (41.7% of total annual sales).  Southeast Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between ILPI and farmland value. The R2 is 0.04, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  Southeast Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southeast Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Southwest Illinois  The Southwest region is 42.1% cropland and 11.3% grassland/pasture. The primary crops grown are soybeans and corn.  In total, 3,620 ac were sold in Southwest IL in the last twelve months. This compares to an average of 3,473 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 1,201 ac (33.2% of total annual sales).  Southwest Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 41 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 31 $/bu. For soybeans, those values were 124 $/ bu and 95 $/bu, respectively.  Southwest Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between ILPI and farmland value. The R2 is 0.03, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  Southwest Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southwest Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: West Illinois  The West region is 57.4% cropland and 10.0% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 6,173 ac were sold in West IL in the last twelve months. This compares to an average of 10,081 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 2,873 ac (46.5% of total annual sales).  West Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 65 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 36 $/bu. For soybeans, those values were 205 $/ bu and 109 $/bu, respectively. West Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between ILPI and farmland value. The R2 is 0.15, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. West Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for West Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: West Southwest Illinois The West Southwest region is 60.9% cropland and 7.4% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 9,447 ac were sold in West Southwest IL in the last twelve months. This compares to an average of 12,263 ac per year sold between 2010-2022. Most sales occurred in the third quarter of the year — a total of 2,755 ac (29.2% of total annual sales).  West Southwest Illinois Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest ILPI show a price of farmland per bushel of corn of 74 $/bu. On the other end, the soils with the lowest ILPI show a price of farmland per bushel of corn of 42 $/bu. For soybeans, those values were 235 $/ bu and 128 $/bu, respectively.  West Southwest Illinois Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the ILPI of the parcel by 245 $/ILPI and subtract 19,602 $/ac. The result is the estimated value of the parcel in $/ac. West Southwest Illinois Yield Trends Average yield for 2015-2021 compared to 2008-2014 for West Southwest Illinois. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Methods The farmland transaction dataset analyzed in the report was drawn from public deed and property transaction records and enhanced with environmental geospatial data by FBN. Only fair market parcel transactions with >=20 ac and at least 70% area in agriculture land uses (cropland or pasture) were included in calculations.  We used the Illinois Soil Productivity Index to classify soils into three quality tiers, each of them representing an equal total area:  High (ILPI higher than 172)  Medium (ILPI 119 to 133)  Low (ILPI below 119) Yield trends across regions and soil quality groups were calculated using FBN field-level yield estimates for corn and soybeans. The FBN yield estimates shown here leverage farmer contributed yield data to help identify patterns between yields and data layers including satellite imagery, weather, soil and more. No farmer contributed yield data was used directly in estimating yields by soil and region.  Direct income ($/ac) was estimated for both corn and soybeans to document how both changes in yield and basis across the state may shape farmland values. To estimate direct income, we simply multiply the estimated per acre yield with the typical grain price received around harvest (September-November) in that year, assuming no storage or drying fees.  More information about grain prices can be found on the FBN Profit Center website .  Land Loans and Farm Financing with FBN® Finance* Whether you’re expanding your Iowa farm with a land purchase, refinancing, or making improvements, FBN Finance can help you secure the capital you need to build a stronger financial future. You could save thousands by financing your farm or ranch at a great rate with a nationwide team that knows ag. Apply in just minutes using our secure and straightforward online loan application . Complete the form below or click here to connect with a member of our team today .  Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, "Farmers First" are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. Information in this report is provided for your individual informational use only, and may not be disclosed, reproduced, summarized, distributed, excerpted, or used for any reason other than for research purposes to aid in your potential purchase, sale, or rental of property. Any unauthorized use of this report or its information is prohibited. Information is reliable but not guaranteed, may be incomplete, and should be independently verified. Farmer's Business Network, Inc. and its subsidiaries are not responsible for the accuracy of this information.  Disclaimer: The material provided is for educational purposes only. It is not intended to be a substitute for specific individualized tax, business, legal, investment or professional advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager. Neither Farmer's Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.  *Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.

Executive Summary The price of farmland in Minnesota grew 25% year-on-year, commanding more than $6,200 per acre. This follows a 12% increase in 2021.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  These increases were primarily driven by growth in farmer savings over the last three years fueled by high commodity prices, increasing government payments and low-interest rates. These low-interest rates also enabled farmers to obtain larger loans to purchase more land, adding pressure to land values and creating competition for farmland coming to the market. [READ: Forecasting 2023 Farmland Values: Will U.S. Land Prices Decrease in 2023?] Why Are Minnesota Farmland Values Important?  Farmland is an essential asset for most farmers in terms of value and importance for their long-term success. At FBN®, our team of data scientists and appraisers puts Farmers First® by continuously monitoring the farmland market to provide transparent, timely and actionable insights. We believe that delivering trusted reporting is essential to creating a better farmland marketplace that’s more fair for farmers — whether buying, selling, or refinancing. This analysis delivers data-driven insights on trends related to Minnesota farmland values by exploring:  Why farmland values increased nationally in 2022  Broad, state-level trends in transaction values and sales volume A detailed analysis of each of the eight United States Department of Agriculture (USDA) agricultural districts in the state. [READ: Why Did National Farmland Values Increase in 2022?] Trends in Minnesota Farmland Values Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Minnesota. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel. Soil Quality Impacts Soil quality is one of the main drivers of farmland values. In Minnesota, the National Commodity Crop Productivity Index for Corn (NCCPI) is a widely used index for rating the relative quality of the soils. Using the NCCPI, we categorize Minnesota's farmland parcels into three soil quality levels, each of them representing an equal total area. (See Methods section at the end of this postfor details about the limits for each soil quality class.)  Because different districts have different average NCCPI scores, a different proportion of each of the three soil quality categories is represented in the area. To determine the year-on-year change in value, we compared farmland values from the last six months of 2021 with the same period in 2022.  At the state level, the soil quality with the most significant percentage change was the High class, with 30.0%.  On the other end, the soil quality with the lowest change in price was the Low class, showing a 9.0% difference.  Regional Land Value Growth  Land values increased in seven districts. Land values decreased in one district. The largest percentage changes were in the North Central and South Central districts, with 48.2% and 32.9%, respectively. The East Central and Central districts saw the smallest percentage change, with 16.7% and -2.8%, respectively. We excluded the Northeast district, for not having enough sales to estimate the different metrics presented in the analysis. The highest average land values were observed in South Central Minnesota, at $9,790 per acre.  The lowest average land values were seen in North Central Minnesota, at $1,510 per acre.   Transaction Volume  Transaction volume was at a record high in 2022, being the highest volume of the last thirteen years. The total area sold was 10.0% higher than the previous year (2021) and 29.5% higher than the last thirteen years' average (2010-2022).  Summary  The price of farmland in Minnesota grew 25.0% year-on-year, commanding more than $6,200 per acre.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Minnesota. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel.  [Curious about trends in other states? Check out the Iowa Farmland Values Analysis or the Illinois Farmland Values Analysis .] Trends by Region: Central Minnesota  The Central region is 49.2% cropland and 11.5% grassland/pasture. The primary crops grown are corn and soybeans. In total, 32,558 ac were sold in Central MN in the last twelve months. This compares to an average of 19,714 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 9,572 ac (29.4% of total annual sales).  Central Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 47 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 17 $/bu. For soybeans, those values were 166 $/bu and 63 $/bu, respectively.  Central Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the NCCPI of the parcel by 207 $/NCCPI and subtract 6,698 $/ac. The result is the estimated value of the parcel in $/ac. Boxes show the distribution of yields. The bottom of the box is the lowest 25% yield, the central line is the median (50%) yield, and the top of the box is the 75% yield. The bottom of the horizontal line is the 10% yield and the top of the horizontal line is the 90% yield. Central Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Central Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: East Central Minnesota The East Central region is 7.3% cropland and 10.3% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 6,807 ac were sold in East Central MN in the last twelve months. This compares to an average of 2,714 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 2,159 ac (31.7% of total annual sales).  East Central Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 18 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 16 $/bu. For soybeans, those values were 64 $/ bu and 57 $/bu, respectively.  East Central Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between NCCPI and farmland value. The R2 is 0.03, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. East Central Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for East Central Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: North Central Minnesota The North Central region is 2.4% cropland and 3.0% grassland/pasture. The primary crops grown are soybeans and alfalfa.  In total, 283 ac were sold in North Central MN in the last twelve months. This compares to an average of 1,624 ac per year sold between 2010-2022. Most sales occurred in the second quarter of the year — a total of 145 ac (51.4% of total annual sales).  North Central Minnesota Soil Productivity and Yield North Central Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for North Central Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: Northwest Minnesota The Northwest region is 52.7% cropland and 5.3% grassland/pasture. The primary crops grown are soybeans and spring wheat.  In total, 27,797 ac were sold in Northwest MN in the last twelve months. This compares to an average of 27,112 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 7,941 ac (28.6% of total annual sales).  Northwest Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 29 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 21 $/bu. For soybeans, those values were 105 $/bu and 76 $/bu, respectively.  Northwest Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between NCCPI and farmland value. The R2 is 0.04, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  Northwest Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Northwest Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: South Central Minnesota The South Central region is 75.0% cropland and 5.2% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 20,973 ac were sold in South Central MN in the last twelve months. This compares to an average of 16,976 ac per year sold between 2010-2022. Most sales occurred in the third quarter of the year — a total of 6,094 ac (29.1% of total annual sales).  South Central Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 47 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 42 $/bu. For soybeans, those values were 162 $/bu and 148 $/bu, respectively.  South Central Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between NCCPI and farmland value. The R2 is 0.0, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. South Central Minnesota Yield Trends  Average yield for 2015-2021 compared to 2008-2014 for South Central Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: Southeast Minnesota The Southeast region is 53.4% cropland and 13.4% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 14,465 ac were sold in Southeast MN in the last twelve months. This compares to an average of 11,956 ac per year sold between 2010-2022. Most sales occurred in the second quarter of the year — a total of 4,182 ac (28.9% of total annual sales).  Southeast Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 44 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 46 $/bu. For soybeans, those values were 160 $/bu and 168 $/bu, respectively.  Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between NCCPI and farmland value. The R2 is 0.0, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. Southeast Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southeast Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: Southwest Minnesota The Southwest region is 79.3% cropland and 7.8% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 22,012 ac were sold in Southwest MN in the last twelve months. This compares to an average of 15,354 ac per year sold between 2010-2022. Most sales occurred in the fourth quarter of the year — a total of 8,307 ac (37.7% of total annual sales). Southwest Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 57 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 40 $/bu. For soybeans, those values were 205 $/bu and 141 $/bu, respectively.  Southwest Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend. In this district, we could not determine a clear relationship between NCCPI and farmland value. The R2 is 0.05, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. Southwest Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southwest Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: West Central Minnesota The West Central region is 63.1% cropland and 7.0% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 30,272 ac were sold in West Central MN in the last twelve months. This compares to an average of 24,342 ac per year sold between 2010-2022. Most sales occurred in the second quarter of the year — a total of 9,496 ac (31.4% of total annual sales).  West Central Minnesota Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest NCCPI show a price of farmland per bushel of corn of 44 $/bu. On the other end, the soils with the lowest NCCPI show a price of farmland per bushel of corn of 18 $/bu. For soybeans, those values were 155 $/bu and 64 $/bu, respectively.  West Central Minnesota Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the NCCPI of the parcel by 139 $/NCCPI and subtract 1,644 $/ac. The result is the estimated value of the parcel in $/ac. West Central Minnesota Yield Trends Average yield for 2015-2021 compared to 2008-2014 for West Central Minnesota. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Methods The farmland transaction dataset analyzed in the report was drawn from public deed and property transaction records and enhanced with environmental geospatial data by FBN . Only fair market parcel transactions with >=20 ac and at least 70% area in agriculture land uses (cropland or pasture) were included in calculations.  We used the National Commodity Crop Productivity Index for Corn to classify soils into three quality tiers, each of them representing an equal total area:  High (NCCPI higher than 105)  Medium (NCCPI 49 to 69)  Low (NCCPI below 49) Yield trends across regions and soil quality groups were calculated using FBN field-level yield estimates for corn and soybeans. The FBN yield estimates shown here leverage farmer contributed yield data to help identify patterns between yields and data layers including satellite imagery, weather, soil and more. No farmer contributed yield data was used directly in estimating yields by soil and region.  Direct income ($/ac) was estimated for both corn and soybeans to document how both changes in yield and basis across the state may shape farmland values. To estimate direct income, we simply multiply the estimated per acre yield with the typical grain price received around harvest (September-November) in that year, assuming no storage or drying fees.  More information about grain prices can be found on the FBN Profit Center website .  Land Loans and Farm Financing with FBN® Finance* Whether you’re expanding your Iowa farm with a land purchase, refinancing, or making improvements, FBN Finance can help you secure the capital you need to build a stronger financial future. You could save thousands by financing your farm or ranch at a great rate with a nationwide team that knows ag. Apply in just minutes using our secure and straightforward online loan application . Complete the form below or click here to connect with a member of our team today .  Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, "Farmers First" are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. Information in this report is provided for your individual informational use only, and may not be disclosed, reproduced, summarized, distributed, excerpted, or used for any reason other than for research purposes to aid in your potential purchase, sale, or rental of property. Any unauthorized use of this report or its information is prohibited. Information is reliable but not guaranteed, may be incomplete, and should be independently verified. Farmer's Business Network, Inc. and its subsidiaries are not responsible for the accuracy of this information.  Disclaimer: The material provided is for educational purposes only. It is not intended to be a substitute for specific individualized tax, business, legal, investment or professional advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager. Neither Farmer's Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.  *Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.

Executive Summary The price of farmland in Iowa grew 17% year-on-year, commanding more than $11,100 per acre. This follows a similar 17% increase in 2021.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  These increases were primarily driven by growth in farmer savings over the last three years fueled by high commodity prices, increasing government payments and low-interest rates. These low-interest rates also enabled farmers to obtain larger loans to purchase more land, adding pressure to land values and creating competition for farmland coming to the market. [READ: Forecasting 2023 Farmland Values: Will U.S. Land Prices Decrease in 2023?] Why Are Iowa Farmland Values Important?  Farmland is an essential asset for most farmers in terms of value and importance for their long-term success. At FBN®, our team of data scientists and appraisers puts Farmers First® by continuously monitoring the farmland market to provide transparent, timely and actionable insights. We believe that delivering trusted reporting is essential to creating a better farmland marketplace that’s more fair for farmers — whether buying, selling, or refinancing. The analysis below delivers data-driven insights on trends related to Iowa farmland values by exploring:  Why farmland values increased nationally in 2022  Broad, state-level trends in transaction values and sales volume A detailed analysis of each of the nine United States Department of Agriculture (USDA) agricultural districts in the state. [READ: Why Did National Farmland Values Increase in 2022?] Trends in Iowa Farmland Values Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Iowa. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel. Soil Quality Impacts Soil quality is one of the main drivers of farmland values. In Iowa, the Iowa Corn Suitability Rating (CSR2) is a widely used index for rating the relative quality of the soils. Using the CSR2, we categorize Iowa's farmland parcels into three soil quality levels, each of them representing an equal total area.  (See Methods section at the end of this postfor details about the limits for each soil quality class.)  Because different districts have different average CSR2 scores, a different proportion of each of the three soil quality categories is represented in the area. To determine the year-on-year change in value, we compared farmland values from the last six months of 2021 with the same period in 2022.  At the state level, the soil quality with the most significant percentage change was the Low class, with 42.0%.  On the other end, the soil quality with the lowest change in price was the Medium class, showing a 21.0% difference. Regional Land Value Growth  Land values increased in all nine districts. The largest percentage changes were in the Northeast and Southwest districts, with 35.4% and 22.2%, respectively. The Southeast and West Central districts saw the smallest percentage change, with 10.7% and 3.4%, respectively.  The highest average land values were observed in Northwest Iowa, at $14,010 per acre. The lowest average land values were seen in South Central Iowa, at $6,090 per acre. Transaction Volume  Transaction volume was at a record high in 2022, representing the highest volume of the last thirteen years. The total area sold was 30% higher than the previous year (2021) and 220.6% higher than the last thirteen years' average (2010-2022). Summary The price of farmland in Iowa grew 17.0% year-on-year, commanding more than $11,100 per acre.  High valuations brought a historically significant volume of acreage to the market in 2022, surpassing the previous record in 2021.  Localized analysis is essential for understanding how soil quality, yield, and farm revenue shape farmland values across Iowa. The cost of land per bushel of production helps optimize investment options with higher returns. Similarly, the slope of yield gain helps assess long-term expected yield for a given parcel. [Curious about trends in other states? Check out the Minnesota Farmland Values Analysis or the Illinois Farmland Values Analysis . ] Trends by Region: Central Iowa The Central region is 72.2% cropland and 10.9% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 13,805 ac were sold in Central IA in the last twelve months. This compares to an average of 3,521 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 4,406 ac (31.9% of total annual sales).  Central Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 80 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 55 $/bu. For soybeans, those values were 257 $/bu and 181 $/bu, respectively.  Central Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  To calculate the value per ac for a different parcel, multiply the CSR2 of the parcel by 168.08 $/CSR2. The result is the estimated value of the parcel in $/ac. Boxes show the distribution of yields. The bottom of the box is the lowest 25% yield, the central line is the median (50%) yield, and the top of the box is the 75% yield. The bottom of the horizontal line is the 10% yield and the top of the horizontal line is the 90% yield. Central Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Central Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: East Central Iowa The East Central region is 61.9% cropland and 14.2% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 6,984 ac were sold in East Central IA in the last twelve months. This compares to an average of 2,532 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 2,604 ac (37.3% of total annual sales).  East Central Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 69 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 56 $/bu. For soybeans, those values were 234 $/bu and 188 $/bu, respectively.  East Central Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.04, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  East Central Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for East Central Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: North Central Iowa The North Central region is 81.4% cropland and 7.7% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 10,857 ac were sold in North Central IA in the last twelve months. This compares to an average of 6,210 ac per year sold between 2010-2022. Most sales occurred in the fourth quarter of the year — a total of 3,641 ac (33.5% of total annual sales).  North Central Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 72 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 46 $/bu. For soybeans, those values were 235 $/bu and 148 $/bu, respectively.  North Central Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.1, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  North Central Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for North Central Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: Northeast Iowa The Northeast region is 60.4% cropland and 15.5% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 8,301 ac were sold in Northeast IA in the last twelve months. This compares to an average of 4,356 ac per year sold between 2010-2022. Most sales occurred in the second quarter of the year — a total of 2,879 ac (34.7% of total annual sales).  Northeast Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 57 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 42 $/bu. For soybeans, those values were 197 $/bu and 143 $/bu, respectively.  Northeast Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.05, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. Northeast Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Northeast Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Northwest Iowa The Northwest region is 81.0% cropland and 8.0% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 9,310 ac were sold in Northwest IA in the last twelve months. This compares to an average of 2,998 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,622 ac (38.9% of total annual sales).  Northwest Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 79 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 58 $/bu. For soybeans, those values were 268 $/bu and 196 $/bu, respectively.  Northwest Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.07, which is low and shows that there is too much noise to stablish a relationship. Other factors may be affecting farmland values that are not captured by soil quality. Northwest Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Northwest Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: South Central Iowa The South Central region is 33.0% cropland and 38.2% grassland/pasture. The primary crops grown are soybeans and corn.  In total, 16,911 ac were sold in South Central IA in the last twelve months. This compares to an average of 3,186 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 6,539 ac (38.7% of total annual sales).  South Central Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 69 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 32 $/bu. For soybeans, those values were 219 $/bu and 96 $/bu, respectively.  South Central Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.14, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  South Central Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for South Central Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Southeast Iowa The Southeast region is 49.9% cropland and 20.9% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 9,064 ac were sold in Southeast IA in the last twelve months. This compares to an average of 2,404 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,499 ac (38.6% of total annual sales).  Southeast Iowa Productivity and Economic Indicators  One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 58 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 37 $/bu. For soybeans, those values were 188 $/bu and 113 $/bu, respectively.  Southeast Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.14, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  Southeast Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southeast Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations. Trends by Region: Southwest Iowa The Southwest region is 67.0% cropland and 18.6% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 7,612 ac were sold in Southwest IA in the last twelve months. This compares to an average of 2,604 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 3,914 ac (51.4% of total annual sales).  Southwest Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 58 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 31 $/bu. For soybeans, those values were 189 $/bu and 94 $/bu, respectively.  Southwest Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend. In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.17, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.   Southwest Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for Southwest Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Trends by Region: West Central Iowa The West Central region is 76.5% cropland and 11.3% grassland/pasture. The primary crops grown are corn and soybeans.  In total, 14,392 ac were sold in West Central IA in the last twelve months. This compares to an average of 2,514 ac per year sold between 2010-2022. Most sales occurred in the first quarter of the year — a total of 4,598 ac (31.9% of total annual sales).  West Central Iowa Productivity and Economic Indicators One interesting metric is the price per bushel of grain. In this district, the soils with the highest CSR2 show a price of farmland per bushel of corn of 68 $/bu. On the other end, the soils with the lowest CSR2 show a price of farmland per bushel of corn of 45 $/bu. For soybeans, those values were 230 $/ bu and 151 $/bu, respectively.  West Central Iowa Soil Productivity and Yield Graph showing the relationship between ILPI and land price. Each point is a 2022 season sale, and the line shows the trend.  In this district, we could not determine a clear relationship between CSR2 and farmland value. The R2 is 0.11, which is low and shows that there is too much noise to establish a relationship. Other factors may be affecting farmland values that are not captured by soil quality.  West Central Iowa Yield Trends Average yield for 2015-2021 compared to 2008-2014 for West Central Iowa. Crop yields in 2012 were anomalously low due to severe drought and were excluded from calculations.  Methods The farmland transaction dataset analyzed in the report was drawn from public deed and property transaction records and enhanced with environmental geospatial data by FBN . Only fair market parcel transactions with >=20 ac and at least 70% area in agriculture land uses (cropland or pasture) were included in calculations.  We used the Iowa Corn Suitability Rating to classify soils into three quality tiers, each of them representing an equal total area:  High (CSR2 higher than 116)  Med (CSR2 65 to 82)  Low (CSR2 below 65)  Yield trends across regions and soil quality groups were calculated using FBN field-level yield estimates for corn and soybeans. The FBN yield estimates shown here leverage farmer contributed yield data to help identify patterns between yields and data layers including satellite imagery, weather, soil and more. No farmer contributed yield data was used directly in estimating yields by soil and region.  Direct income ($/ac) was estimated for both corn and soybeans to document how both changes in yield and basis across the state may shape farmland values. To estimate direct income, we simply multiply the estimated per acre yield with the typical grain price received around harvest (September-November) in that year, assuming no storage or drying fees.  More information about grain prices can be found on the FBN Profit Center website .  Land Loans and Farm Financing with FBN® Finance* Whether you’re expanding your Iowa farm with a land purchase, refinancing, or making improvements, FBN Finance can help you secure the capital you need to build a stronger financial future. You could save thousands by financing your farm or ranch at a great rate with a nationwide team that knows ag. Apply in just minutes using our secure and straightforward online loan application . Complete the form below or click here to connect with a member of our team today .  Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, "Farmers First" are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. Information in this report is provided for your individual informational use only, and may not be disclosed, reproduced, summarized, distributed, excerpted, or used for any reason other than for research purposes to aid in your potential purchase, sale, or rental of property. Any unauthorized use of this report or its information is prohibited. Information is reliable but not guaranteed, may be incomplete, and should be independently verified. Farmer's Business Network, Inc. and its subsidiaries are not responsible for the accuracy of this information.  Disclaimer: The material provided is for educational purposes only. It is not intended to be a substitute for specific individualized tax, business, legal, investment or professional advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager. Neither Farmer's Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.  *Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. 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Farmland values across the U.S. increased substantially in many regions last year. What drove this growth in farmland prices?  Interest Rate Increases In one of the sharpest rate increases in decades, the Fed raised the federal interest rate from 0.08% in January 2022 to 4.1% in December 2022. However, this increase is unlikely to immediately affect farmland values. While higher interest rates typically put downward pressure on the land market, impacts aren’t usually seen until one or two years after the increase.  Zero Real Mortgage Rate  The real mortgage rate is one of the best predictors of farmland value change. Since interest rates were low and inflation high for a big part of 2022, the real mortgage rate — calculated as the mortgage rate minus inflation — remained negative.  As of February 2023, it is currently approaching zero with a 6.33% mortgage rate and 6.6% inflation rate (based on the latest available data from November 2022). A 0.3% value indicates positive increases in farmland values of +8.8%. [See Farmland at Risk: An FBN Special Report for more information on these trends.] Farming Sector Strength On average, the farming sector is in an excellent financial position. The debt-to-asset ratio is low, indicating that farmers have used the high net income period to build equipment and financial reserves.  Looking Ahead at Farmland Values While it is impossible to forecast precisely how these factors will play out in future months, our latest farmland valuation article series spotlights pricing and land sale activity across Illinois, Iowa and Minnesota. These trends that will continue to shape the farmland marketplace in the future. The article series from FBN® Data Science delivers data-driven insights on trends related to farmland values in Illinois, Iowa and Minnesota by exploring:  Why farmland values increased nationally in 2022  Broad, state-level trends in transaction values and sales volume A detailed analysis of each of the United States Department of Agriculture (USDA) agricultural districts in each state. Read the Illinois analysis here. Read the Iowa analysis here. Read the Minnesota analysis here. Looking Ahead at Future Farmland Values in 2023 What will happen to farmland prices in the next few months? Will farmland values decrease or increase? By developing a series of data-based models to gather investigative insights, the FBN Data Science team forecast its expectations for price changes in 2023. Check out their latest article here for more information. Why Are Farmland Values Important?  Farmland is an essential asset for most farmers in terms of value and importance for their long-term success.  At FBN , our team of data scientists and appraisers puts Farmers First® by continuously monitoring the farmland market to provide transparent, timely and actionable insights. We believe that delivering trusted reporting is essential to creating a better farmland marketplace that’s more fair for farmers — whether buying, selling, or refinancing. Land Loans and Farm Financing with FBN Finance Whether you’re expanding your farm with a land purchase, refinancing, or making improvements, FBN Finance can help you secure the capital you need to build a stronger financial future. Save thousands by financing your farm or ranch at a great rate with a nationwide team that knows ag. Apply in just minutes using our secure and straightforward online loan application . Complete the form below or click here to connect with a member of our team today .  Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, "Farmers First" are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.