For many landowners, farmland represents not only a livelihood but also one of their most valuable long-term assets. Whether you are exploring a sale, estate planning, or simply keeping your balance sheet up to date, knowing the true value of your land is essential to informed decision-making. Farmland ownership comes with both emotional and financial weight, and understanding what drives value can help you maximize returns and protect your legacy.
Farmland Location: The First Driver of Value
As with all real estate, location is the foundation of farmland value. But in agriculture, location isn’t just about the state or county, it’s hyperlocal. Values can shift dramatically between neighboring townships or even across a single section line. Farms near competitive grain markets, livestock or dairy facilities, ethanol plants, or urban centers tend to command higher premiums. Local buyer demand, especially from neighboring farmers, can push values higher than typical market averages.
Soil Ratings and Farmland Productivity
After location, soil productivity plays a central role in valuation, especially in the Midwest. Each state has its own method of measuring soil quality:
Iowa: Corn Suitability Rating 2 (CSR2) on a scale of 0–100
Illinois: Productivity Index (PI), ranging from 47–147
Indiana: Weighted Average Productivity Index (WAPI), on a scale of 0-200
National: USDA’s National Commodity Crop Productivity Index (NCCPI), used broadly across the country
Generally, the higher the rating, the greater the yield potential — and therefore the higher the land value. However, buyers also consider consistency across a farm. A tract with uniform, high-quality soils often brings a premium compared to one with pockets of weaker ground.
To learn more about soil ratings, click here.
Improvements and Infrastructure Impact on Farmland Value
Surface and subsurface improvements can significantly impact value. Key examples include:
Irrigation – In regions like the High Plains or the West, access to irrigation and secure water rights are often the difference between marginal and highly productive farmland.
Drainage Tile – In the Midwest and other areas with ample precipitation, well-tiled farms can garner improved yields, fewer delays at planting and harvest, and better long-term soil health, often resulting in a premium compared to untiled ground.
Fertility and Management Practices – Land that has been well cared for — with balanced fertility, reduced compaction, and sustainable practices — can attract more buyers and higher bids, since it reduces risk and increases income potential from day one.
Sustainability and Soil Health in Farmland Valuation
Increasingly, buyers are also paying attention to the long-term sustainability of farmland. Practices such as cover cropping, reduced tillage, nutrient management, and conservation programs not only protect soil health but can also enhance a farm’s value. Healthy soils retain more water, resist erosion, and improve yields over time, making them more attractive to both farmers and investors. In some cases, farmland enrolled in regenerative agriculture programs can generate additional income streams, further strengthening its appeal in today’s evolving agricultural economy.
Farmland Market Trends and Buyer Demand
Ultimately, farmland is worth what the market will pay. Recent comparable sales provide the clearest benchmark, but even those can be influenced by unique factors:
Auction Competition – Strong bidding among neighbors can push prices above typical market levels.
Investor Interest – Institutional and private capital has increasingly flowed into farmland, viewing it as a stable, inflation-hedging asset. Buyers with 1031 Exchange money also influence the market, whether a local landowner or investor.
Commodity Prices and Interest Rates – Rising grain or livestock prices can increase returns and buyer confidence, while higher interest rates may cool demand.
Understanding these broader market forces, alongside local supply and demand, is key to arriving at a realistic valuation.
Income Potential and Long-Term Farmland Value
In addition to soils and comps, advisors and buyers often weigh a farm’s income potential. What are the current rental rates? Is the land leased on flexible terms or a long-term cash rent? Are there conservation programs or government incentives tied to the property? These factors can add stability and long-term appeal, especially to investors.
The Federal Crop Insurance Program can also impact how advisors and buyers analyze farm income. According to the USDA Risk Management Agency (RMA), nearly 90% of planted acreage for major crops is covered by crop insurance. When underwriting a potential farmland purchase, the minimum revenue guarantee of the crops can be calculated to determine base income on a farm by using the county t-yield, RMA base price, and insurance coverage.
The Federal Crop Insurance Program makes U.S. farmland a unique and resilient asset class and coverage options can impact buyer sentiment.
Conclusion: Know Your Land’s True Worth
Determining farmland value is not a one-size-fits-all exercise. It requires a nuanced look at soils, improvements, market demand, income potential, and regional trends. The right valuation combines hard data with local expertise and boots-on-the-ground knowledge.
Our team specializes in farmland across the U.S. and brings together sales data, national market insights, and regional experience to give landowners a clear picture of what their property is worth. Contact us today for a confidential, no-obligation opinion of value and a conversation about your land goals.
