Reading the 2025 Farmland Tea Leaves: Forces Pushing Values Up and Down

Predicting farmland values is an exercise in weighing competing forces. At any given moment, a set of factors is pushing values higher while another set is pulling them lower. The direction of the market depends on which set carries more weight — and right now, the balance is more complex than it has been in years.

At Schrader's 2025 annual market presentation, our president RD Schrader laid out the forces acting on farmland values heading into this year and beyond. What follows is a balanced assessment of the upward and downward pressures shaping the market, drawing on the latest available economic and agricultural data. This is not a prediction — it is a framework for understanding the forces at work, so landowners can make informed decisions.

Three Forces Pushing Values Down

1. Commodity Price Pressure

Corn and soybean prices have retreated from the highs that lifted farm incomes and land values in 2021-2023. Lower commodity prices compress farm operating margins, which in turn reduces what farmers can afford to bid for additional acreage. While prices remain above the depressed levels of the mid-2010s, the direction of travel has been negative, and there is no immediate catalyst for a return to the peaks of recent years.

2. Interest Rates Remain Elevated

The Federal Funds rate sits at approximately 4.5% as we enter 2025 — well above the near-zero levels that fueled the farmland boom of 2020-2023. Higher interest rates affect farmland values in two ways. First, they increase the cost of financing land purchases, reducing the effective purchasing power of leveraged buyers. Second, they make alternative investments — bonds, CDs, money market funds — more attractive relative to farmland's modest current yield. As we discuss in our analysis of farmland capitalization rates, cash rent as a percentage of land value has declined to roughly 2.2%, which looks thin compared to a 4.5% risk-free rate.

3. South American Production Competition

Brazil's agricultural expansion represents a structural headwind for U.S. commodity prices — and by extension, farmland values. Brazilian soybean exports now run approximately 3,750 million bushels annually compared to roughly 1,800 million bushels from the United States. Brazil has effectively doubled the U.S. in soybean export volume, a shift that was unthinkable two decades ago. We examine this competitive dynamic in detail in our analysis of the Brazil soybean challenge.

Six Forces Pushing Values Up

1. Tight Farmland Supply

The single most important support for farmland values is the simple fact that very little farmland comes to market in any given year. Farmers are reluctant to sell productive land, and the total inventory of U.S. cropland is essentially fixed. When supply is structurally constrained and demand remains solid, values hold even in the face of other headwinds.

2. Government Payments and Support

Federal farm support programs continue to provide a backstop for agricultural income. Net farm income is forecast at $180.1 billion for 2025, a figure that remains above the 2004-2023 average. While below the peaks of 2022, this level of income supports land values by helping keep the agricultural economy healthy and farmers financially capable of bidding on land.

3. Trade Policy Uncertainty

The incoming Trump administration has signaled an aggressive trade posture, particularly regarding tariffs. While tariffs create uncertainty — and uncertainty is generally negative for asset prices — the agricultural sector has historically benefited from the government payments and market facilitation programs that accompany trade disruptions. The Purdue-CME Ag Economy Barometer jumped from 88 in mid-2024 to 152 in February 2025, a dramatic increase that reflects agricultural producers' optimism about the policy direction — what many are calling the "Trump Bump."

4. Long-Term Food Demand

Global population continues to grow, and the developing world's protein consumption is increasing as incomes rise. The long-term demand trajectory for agricultural production is unambiguously upward. The land that produces food is a finite resource serving an expanding market — a fundamental relationship that supports values across market cycles.

5. Renewable Energy Demand

As we detail in our renewable energy analysis, the buildout of solar and wind generation is creating a new, non-agricultural competitive class for farmland. Transition land values in Indiana surged 21.6% in 2024 while traditional farmland softened — a divergence driven by several factors including energy development demand.

6. Healthy Balance Sheets

The farm sector's debt-to-asset ratio stands at 12.86% — a healthy figure that contrasts sharply with the 22% ratio that preceded the farm crisis of 1985. Low leverage means farmers are not being forced to sell land to service debt, which keeps supply tight. It also means the sector can absorb the current income downturn without the cascading financial stress that triggered the 1980s crisis.

The Net Assessment

Weighing these forces, the picture that emerges is one of stability with modest downside risk in the near term. The downward pressures — interest rates, commodity prices, and international competition — are real and meaningful. But they are counterbalanced by a set of structural supports — tight supply, healthy balance sheets, government income backstops, renewable energy demand, and long-term food demand — that create a durable floor under values.

This is not a market poised for a crash. The conditions that preceded the 1980s farm crisis — excessive leverage, collapsing exports, and sharply rising interest rates hitting an already-indebted sector — are absent across the majority of operations. Today's farm sector is well-capitalized, demand drivers are diversifying beyond traditional agriculture, and the supply of farmland remains structurally constrained.

For landowners, the practical implication is that the current market remains a strong environment for selling farmland. Values are near historic highs, buyer demand is solid, and the forces supporting the market appear more durable than the forces working against it. The question is not whether farmland values will remain elevated — the data strongly suggests they will — but whether any individual owner's circumstances make this the right time to sell. That is a question best answered in a conversation with an experienced Schrader auction manager who can evaluate your specific property and goals.