Per latest USDA estimates, most categories of farmland value in Oregon continue to rise

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On August 4th, the US Department of Agriculture (USDA) released its latest state-level data on farmland values. The data come from the USDA’s June Area Survey, which asks a rotating panel of producers to estimate the market value of their land. Responses from surveyed farmers are then weighted and extrapolated to generate estimates for entire states. The survey-based estimates are broken down into four categories of per-acre land values: (1) farm real estate, measuring the value of all land and buildings on the farm, (2) non-irrigated cropland, (3) irrigated cropland, and (4) pastureland.

In Oregon, the per-acre value of farm real estate is $3,180 in the most recent data (see Table 1), representing a $140 (4.61%) increase in nominal terms over the past year. Note that this is in nominal terms, meaning that it is not adjusted for inflation. Economists typically examine trends in farmland values over time using real (or inflation-adjusted) values, which account for shifts in values relative to incomes and the prices of other goods. After adjusting for inflation using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator, the change in farm real estate value is more muted, but still positive, amounting to a $46 (1.46%) increase in 2023 dollars. When compared to its most recent 5-year average, farm real estate values are up $134 (4.41%). These changes indicate that the value of Oregon’s farm real estate has outpaced inflation in recent years, as it has for much of the last several decades (see Figure 1).

Figure 1: Farm real estate (land and buildings) value, Oregon, 1998-2023

Non-irrigated cropland value, at $2,600/acre, is down slightly over the past year in real terms, representing a decline of -$81 (-3.01%). Compared to its 5-year average, the change is a much smaller decline of -$3 (-0.11%). The value of irrigated cropland, on the other hand, is up to $6,600/acre in 2023, a $53 inflation-adjusted gain of 0.81%. Irrigated cropland value is up even more, by $203 (3.18%), relative to its 5-year average. Pastureland value, at $950/acre, experienced the largest gain of any specific land category, increasing by $22 (2.38%) compared to 2022 and $41 (4.49%) against its 5-year average. Despite the recent drop in the real value of non-irrigated cropland over the past year, the values of all categories of Oregon’s farmland have generally more than kept up with inflation in recent history (see Figure 2).

Figure 2: Inflation-adjusted farmland values for different land uses, Oregon, 1998-2023

With aggregated state-level data on farmland values, it is difficult to tease out any direct cause of the observed trends or year-to-year changes. One thing that is clear, however, is that the increases in interest rates seen over the past couple of years have not yet translated into large decreases in the value of farmland. When interest rates go up, we generally expect the value of land to go down, as debt payments for land purchases go up and landowners put a greater discount on the net income they expect to receive from the land in future years. It is plausible that this is why non-irrigated cropland values have started to come down and growth in overall farm real estate and irrigated values is lower than in the last couple of years, but note that pastureland value growth is actually slightly higher than it was over 2021-22. The contrasting trends between irrigated and non-irrigated land may also be related to the droughts that Oregon, and much of the west, continues to experience, which should place a premium on access to irrigation water.

Table 1: Summary of 2023 USDA farmland values for Oregon.

The fact that Oregon’s agricultural land has generally continued to appreciate in value has both pros and cons. Investors tend to be attracted to farmland because it generally keeps pace with inflation, which makes it an attractive and relatively safe asset class. For many reasons, having access to affordable farmland is key for producers, as real estate is the most common source of collateral in farm-related loans. Without owning farmland, it may be more difficult for producers to obtain the capital, on affordable terms, that allows them to make other investments in their operations. When land values increase, current landowners benefit, but it only makes it harder for renters and new and beginning producers to purchase the land they need to grow their operations.

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