The U.S. farmland market is showing signs of normalization in 2025, according to new data from the Realtors Land Institute and Acres. The most notable shift: a 10% pullback in high-quality (Class A) farmland across key Midwest states like Iowa and Illinois, following record-setting prices in 2021-2022.

This correction reflects a post-boom recalibration after a surge fueled by strong commodity prices, low interest rates, and aggressive land acquisition. During that peak period, transaction volumes reached up to 2x normal levels, pushing valuations beyond sustainable benchmarks.

Iowa Farmland Prices

Illinois Farmland Prices

Class B land has proven more resilient, signaling that buyers are becoming more cautious and price-sensitive amid higher input costs, interest rates, and tighter margins.

A critical factor behind these shifts is energy price volatility, which directly impacts fuel and fertilizer costs-key drivers of farm profitability and land values.

Ongoing geopolitical tensions, particularly in global oil markets, are adding uncertainty. Higher input costs are compressing margins, which in turn affects how much producers and investors are willing to pay for land.

California: Water now defines land value

Water security creates a two-tier land market in specialty crops

In contrast to the Midwest, California farmland-especially almond acreage-is increasingly valued based on water access, not just soil productivity.

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California Almond Land Values

Tier 1 land-located in districts with secure, multi-source water-commands premiums above $30,000 per acre, while Tier 2 and non-irrigated "white space" land can fall below $20,000 or even $13,000 per acre.

This divergence is being accelerated by California's Sustainable Groundwater Management Act (SGMA), which is expected to remove up to 750,000 acres of irrigated farmland by 2040-roughly 10% of Central Valley acreage.

Transaction volumes stabilize, but risks remain

After extreme volatility during the pandemic-era boom, farmland transaction volumes have returned to pre-2020 levels, signaling a more stable market environment.

However, California is seeing an increase in distress-driven sales, as some operators struggle to absorb rising costs and water constraints.

Meanwhile, government support programs are playing a stabilizing role, helping producers maintain operations and avoid forced land sales-at least in the short term.

The farmland market is no longer moving as a single national story. Instead, it is increasingly shaped by regional fundamentals:

• Midwest: driven by yields, commodity cycles, and input costs
• California: values dictated by water access and regulatory pressure