As farmland rates continue to hit record highs, many landowners may consider whether they’re getting the most out of their land in this booming market. 

Of the many factors that go into valuing your farmland—whether for sale or lease—one of the most important to consider is farmland quality. 

Unfortunately, there’s not a quick and easy way to predict the quality of a given piece of farmland–until now. Let’s take a look into some of the major factors that impact the quality of farmland so you can make informed decisions when the time comes to lease or sell your land. 

The value of investments lies in their ability to appreciate in value, providing a return to the owner at a later date. Due to the consistent need for land for farming and non-farming purposes, land investments have always been stable and often quite lucrative for investors. 

Unlike stocks, however, there aren’t a set of fairly reliable factors to provide a clear and comparable valuation of a given farm. Even within similar geography, farm operations vary widely, and comparing them is often an apples-and-oranges situation. 

At the end of the day, however, it’s all about making money from the land. This makes land quality one of the most important factors in valuation. 

For landowners, this presents an exciting opportunity. If you take actions to improve your land quality—whether that’s planting cover or soil-replenishing crops, using environmentally friendly crop protection, or other sustainable practices—you can significantly increase the amount you get from a lease or a sale. That is, assuming there’s an interested buyer in your local land market. 

Given the core importance of farmland quality to your valuation, and thus your ability to realize a profit through sale or lease, it’s important to have a firm grasp on the factors that go into determining land quality. Here are eight to consider. 

While there are certainly cases where landowners undercharge their tenant farmers, looking at historical lease amounts can give you a great starting point. If previous lease amounts are relatively high, odds are you’re working with a high quality piece of land. 

Ultimately, the value of farmland rests on how much you’re able to produce. By looking at historical yields, particularly from the previous five years, you can get a sense of the land quality. And if you’re noticing an upward trend, perhaps it’s time to make a change. 

The quality of your soil is a major factor in your farmer’s ability to realize the value of your farmland. Different crops thrive in different soils, and the higher the quality of the soil the more likely your farmer will be to achieve a high yield. 

Every part of the country has one or a mixture of six different soil types. The following classifications are based on the texture and size of soil particles, as well as the mineral and nutrient content of each type: 

Fun fact: every state has its own “state soil,” just like a flower or bird. If you’re curious as to the type of soil used on your farmland, take a look at the Common Ground soil mapping tool right here. 

READ MORE: Get a Cashrentstimate and check out your parcels soil map right here. 

Two of the major factors that impact a field’s soil quality are historical crops and chemical use. Corn, for example, depletes the soil of nutrients, so corn that’s not grown in rotation leads to a lower soil quality. Additionally, indiscriminate use of pesticides and other chemicals can also have an adverse effect on the soil. 

In addition to the soil quality, there are other factors intrinsic to the field that impact its ability to yield value. Generally, farmers prefer rectangular shapes over irregular for easier row planting, flat land over hilly, as well as a generally consistent soil profile across the field. 

The quality of water on the land is another factor that dramatically impacts your yield. Issues affecting water quality can include water rights issues, pump capacity, potential future drought, salinity issues, and more. 

Additionally, consider the quality of the irrigation equipment. How old is it? Are the engines powering the equipment in good condition? Is it sufficient to fill the farmer’s needs, or will they need to supplement? 

Although weather and climate are beyond anyone’s control, they do play a major factor in valuation of a land because of their undue impact on crop yield. 

After all, a major weather event can sweep across the Midwest—much like the floods of 2019—and completely upend the season. On the other hand, in 2022 we’ve experienced record drought numbers, which also causes major issues.

Keep in mind that while understanding historic weather patterns is important, freak events do happen. Balancing long-term climate trends versus hundred-year storms is key when considering how weather impacts the land value. 

Growing crops is one thing. Taking them to market is a whole endeavor in itself. If a piece of land is near a commodity distribution center, that makes it much more valuable—whether you’re transporting the grain yourself or relying on a third party.  

In the same vein as commodity distribution, proximity to equipment repair shops is also a factor in determining land value. Not only that, but it’s a good idea to find out the condition of the repair shops and whether they’ll fit your farmer’s needs. 

Houses, grain storage, and barns all play a significant factor in the farmability on the land. The ability to sub-lease grain storage or hog, poultry, or dairy facilities can be a major bonus for a tenant farmer. (Make sure you spell the terms of this in the lease!)

Farmland quality revolves around a single point: the ability to generate a significant crop yield from that land and distribute that crop to the market. All of the factors we mentioned above tie back to one or both of those objectives.

The more you can improve in these areas, the higher the quality of your land—and the more you’ll be able to sell or lease it for. 

So are you getting the most out of your current farmland? CommonGround provides a suite of tools to help you determine your land quality, and then connect you with an online marketplace of farmers who are ready and willing to take it over.

Learn more about CommonGround here.