Why Farmland Doesn’t Always “Pencil Out” — And Why That Matters

I hear it all the time:

“Land is too high.”

Some blame greedy sellers. Others say the numbers just don’t work. Most of the time, what they really mean is this:

They’re comparing today’s land prices to today’s grain prices—and deciding it doesn’t make sense.

But here’s the reality:

Farmland has never been valued on that alone.

Looking at One Year Doesn’t Tell the Whole Story

If farmland were only worth what it could produce in a single year at current commodity prices, land values would swing dramatically up and down.

But they don’t.

Because farmland isn’t just an income calculation—it’s a long-term asset.

---

Farmland Is More Than Just Income

The truth is, farmland carries value far beyond what it earns in a single season.

It is:

• A hard asset
• An income-producing investment
• Something that typically appreciates over time

That combination is what many people overlook.

Unlike a vehicle or other depreciating asset, farmland has historically moved in the opposite direction—it produces income while also increasing in value over time.

---

The Benefits Most People Miss

Farmland ownership can offer more than just crop returns. Depending on the situation, it may provide:

• Tax advantages
• Long-term financial stability
• Borrowing strength
• Control over a tangible asset
• Security in uncertain markets

It’s something many farmers and investors understand deeply—because they can see it, use it, and trust it.

---

Let’s Be Real: Not Every Deal Is Perfect

This doesn’t mean every land purchase is smart.

It doesn’t mean every buyer is right.

And yes—there are occasional sellers who push too far.

But in reality, truly “greedy” sellers are rare. More often, the market sets the price. Competitive bidding and strong demand can make prices feel inflated, even when they reflect what buyers are willing to pay.

---

Agriculture Is in a Tough Cycle Right Now

It’s also important to acknowledge something real:

Agriculture is hurting right now.

Margins are tight. Some producers—especially those carrying too much debt or without enough cushion—may not make it through this cycle.

That’s not new. It’s part of agriculture.

---

Farming Has Always Been Cyclical

There are strong years and difficult ones.

There are seasons of optimism—and seasons of uncertainty.

That cycle has always existed, and it always will.

The difference comes down to perspective.

---

The Long View Changes Everything

Buyers who take the long view understand something different:

They’re not just buying land for this year.
They’re buying it for the next 10, 20, or even 30 years.

Productive farmland is limited. It always has been.

And the people who own it—or want to—understand just how important that is.

---

So… Does Farmland Really “Pencil Out”?

When someone says land doesn’t pencil out, sometimes they’re not wrong—they’re just looking at it too simply.

They’re focusing on one piece of the equation.

Farmland value isn’t just about this year’s return.

It’s about:

• Income
• Appreciation
• Control
• Tax strategy
• Long-term security

---

A Perspective Worth Considering

There’s a lesson here that many people learn a little too late.

At one point, $2,800 per acre felt expensive.

Looking back now, it tells a very different story.

If you’ve been questioning whether land makes sense right now, you’re not alone. Sometimes it just takes looking at the full picture to see it differently.

Jason Smith
Broker & Auctioneer
515-537-6633
[email protected]

Our past auction results can be found here.