A recent snapshot of the land market for grass seed production in the Willamette Valley (Revised)

Revision: I encountered an error in the previous version of this post that affected the percentage changes shown in the maps in Figures 3 and 4. The error led to an understatement of the 2013-2019 average rent values. Basically, the USDA did not conduct a rent survey in 2015 and 2018, so there are only five years of valid rents during this period. In the previous versions of the figures, I had mistakenly taken the average rent over this period over 7 years instead of 5, which led to the 2013-2019 rental rates being artificially lower than they were in reality. Note that this only affected the percentage changes in rents and cap rates between 2013-2019 and 2020-2025, and not the main takeaways regarding land prices or the more recent 2020-2025 rents and cap rates. However, I regret the error and apologize to readers and audience members at the Oregon Seed Growers League meeting.

Earlier this month, I had the privilege of giving a presentation at the annual meeting of the Oregon Seed Growers League. My talk focused on the land market for seed growers in the Willamette Valley. In this post, I’m going to give a brief recap of what I presented at the meeting.

Grass seed is one of Oregon’s primary agricultural outputs, routinely ranking among the most valuable farm commodities produced in the state. Most of Oregon’s grass seed production occurs in the Willamette Valley, with the Grande Ronde Valley in Northeast Oregon also contributing to the state’s leading position in the seed industry.

After a boom during the Covid-19 pandemic, when many homeowners invested in their yards, the seed industry has grappled with a number of economic challenges. First, as the demand stemming from the pandemic died down, there was a significant oversupply of seed being brought to market, which pushed farm gate prices down. At the same time, a strong dollar made it difficult to market the crop overseas, in China, or to Canada. International trade conditions were not helped, at least in the near term, by the recent rounds of tariffs negotiations. Among other things, the costs of key inputs, including labor and fertilizer, have also risen substantially in recent years, squeezing already-thin profit margins.

The price of land for seed growers has not gotten any cheaper in recent years. Figure 1 plots the average price of an acre of land in grass seed/sod production using both a 12-month rolling average (in grey) and a smoothed trend line (in black dashes). Note that I classified parcels by land use with the USDA’s Cropland Data Layer, which combines grass seed and sod (or turf grass) into a single category, and retained all sales of at least 20 acres and where at least 25% of the land showed a grass seed/sod cover in any year. Turf grass production is a distinct, smaller industry, so I’m reasonably confident the numbers I show largely represent grass seed operations.

Between 2000 and 2025, the price of seed land doubled in inflation-adjusted terms, from $7-8,000/acre to about $15,000/acre.  The average price of land spiked during the pandemic before softening and then beginning to rise again slowly over the past year.

Figure 2 shows average land prices by county for 2020-2025, with numeric labels representing the percentage change from the 2013-2019 period. Average current prices are highest in Washington and Clackamas, which is at least partly attributable to their close proximity to the Portland Metro area. Recent prices are at least $10,000/acre in all counties, however. The highest growth rates have occurred in Polk (38.9%) and Linn (37.5%), with Yamhill and Washington also seeing growth rates in excess of 30%.

Most of the parcels in the sample are for irrigated land, which sells for a premium compared to dryland. Cash rents are commonly used as an estimate of the net returns accruing to farmland owners. Although I do not have information on cash rents for seed operations, I approximated the typical seed cash rent using county-level irrigated and non-irrigated rent data from the USDA’s National Agricultural Statistics Service. For example, if the county’s irrigated rent is $200/acre and the non-irrigated rent is $100/acre, and 75% of the seed land sales are irrigated, the average seed rent is 0.75(200) + 0.25(100) = $175/acre.

According to this measure, current rents range from over $100/acre to nearly $350/acre (Figure 3). Rents have increased in all but one county between 2013-19 and 2020-25 (Figure 3). The exception is Benton, where rents have essentially remained flat. Current rents range from over $100/acre to nearly $350/acre. Yamhill stands out, with an average rent increase of more than 30%, while Polk, Marion, and Linn have registered per-acre rent gains of more than 10%.

Putting this all together, Figure 4 shows the ratio of average rents to land prices over the same periods. This ratio is known as the farmland capitalization rate (or cap rate), and it can be a useful measure of the profitability of investing in land. Higher cap rates indicate a faster payback period for a land investment. Recent cap rates range from 0.9 to 2.1%, with the highest being in Linn, Marion, and Yamhill. Because land prices have risen faster than rents in most counties, cap rates have generally gone down. The two counties where rent growth has outpaced land price growth – Marion and Yamhill – have seen relatively small percentage gains in cap rates. For four of the eight counties, however, cap rates have decreased by double digits in percentage terms.

Taking a wider view, current cap rates are quite small from an investment portfolio perspective, even for farmland. The cap rates I came up with are also slightly overstated because I did not adjust the rents for property taxes paid by the landowner. Between 2000 and 2025, the 10-year Treasury rate averaged about 3% and are currently above 4%. Treasuries are seen as a relatively safe investment asset and are about as close as you can get to a risk-free rate of return. To the extent that the rent estimates I showed are an accurate measure of average net farm income, the implication is that current farm income alone is not sufficient justification to purchase land.

Why then would anyone buy land? In addition to the prestige and intrinsic value associated with owning land, it may also bring additional streams of farm-related income (e.g., agritourism activities). Prospective buyers may also be betting on continued future appreciation, relying on off-farm income, using land as an inflation hedge, or, in the case of more experienced producers, seeking better lending terms through down payments and collateral.

Despite the general downturn the industry has faced as of late, the continued upward trend in grass seed land prices represents a significant gain in net worth for established producers who already own their land.  For a beginning farmer trying to cash-flow a land purchase, however, the math doesn’t pencil out on farm income alone, which exemplifies the core affordability problem for producers looking to build and grow a profitable farm enterprise.

Note: Farmland price data come from proprietary data purchased from Cotality. I determined sales involving land used in grass-seed operations using the following criteria: (1) at least 20 acres sold, (2) not inside urban growth boundaries, (3) at least 50% of the land is class I-VI soils, (4) price is between $100 and $75k per acre, (5) land is primarily zoned for agricultural use, and (6) at least 25% of the land has a grass seed cover between 2009 and 2024. Irrigated land is determined using a combination of Oregon Water Resource Department’s water rights database and remote-sensing data from LANID.