A letter from 1925

I found a letter from 1925. A long-gone relative of mine was looking to buy a farm near Hayti, and this appears to be his landlord’s response. That simple farmer-to-farmer transaction of $70 per acre started me on this quest.

It got me thinking about the farms I grew up on and the farms all across District 4. I also started thinking about what the actual sales are telling us. This is where I ended up:

In my professional role as an appraiser, sales indicate that productive farmland in eastern South Dakota has shown strong, steady long-term value growth.

A typical high-productivity non-irrigated cropland acre in our area was worth about $70 in 1925. Today, comparable land in District 4 and surrounding eastern counties often trades in the $11,000 to $13,500+ per acre range, with $12,500 serving as a solid representative value.

That represents a 178.6 times increase over roughly 101 years, with a compound annual growth rate of 5.3 percent.

Here is how that growth compares to inflation and the broader stock market:

Investment	1925 Value	Today’s Approximate Value	Total Growth Factor	Annualized Return (CAGR)	Current Gross Cap Rate
Eastern SD Farmland (District 4)	$70	$12,500	178.6×	5.3%	2.2 – 2.7%
Inflation (CPI)	$70	$1,321	18.9×	2.95%	—
S&P 500 (with dividends reinvested)	$70	≈ $1,700,000	24,285×	10.5%	—

Tenant vs. Landlord: Who Has the Advantage Right Now?

In farming and land investment, there is an important distinction between return ON capital (the cash income or yield you earn each year) and return OF capital (getting your original investment back and hopefully growing it through long-term appreciation).

For eastern South Dakota farmland today, the numbers break down like this:

Factor	Tenant (Renter) Advantage	Landlord (Owner) Advantage	Current Edge (2026)
Return ON Capital	Keeps more working capital. Pays rent but avoids tying up money in land.	Receives steady rental income ($250–$310/acre gross).	Slight edge to Tenant
Return OF Capital	Gets none. All long-term value growth stays with the owner.	Captures the full historical 5.3% annualized growth (178× increase since 1925).	Strong edge to Landlord
Cash Flow & Risk	Lower financial risk and no debt service or property taxes on the land.	Bears carrying costs and price risk, but builds equity.	Edge to Tenant
Net Return After Expenses	Operator keeps crop revenue minus rent, inputs, and labor.	Gross rent minus taxes and expenses produces a modest net yield (often 1.5–2.0%).	Depends on year
Inflation Hedge	Limited. Rents rise slowly.	Strong historical hedge (farmland beat inflation by about 2.35% per year).	Edge to Landlord

What This Means for District 4

It is important to note that this analysis focuses only on productive farmland values.

Sales indicate that eastern South Dakota farmland has grown more than 9 times faster than the overall cost of living (inflation) over the past century.

After adjusting for inflation, it has delivered real annual growth of roughly 2.35 percent above inflation. That is steady, tangible wealth building right here at home.

Current cash rents for high-productivity cropland in our region typically range from $250 to $310 per acre. Using a conservative $280 rent on a $12,500 land value produces a gross cap rate of about 2.24 percent (before property taxes and other expenses). This reflects strong demand for quality farmland combined with stable rental income.

Right now, being a tenant gives the short-term cash-flow advantage. You get the return ON capital (crop income) without locking up hundreds of thousands of dollars in land equity. That flexibility helps when crop margins are tight.

Being a landlord (owner) delivers the long-term wealth-building advantage through return OF capital. The rental yield is modest. That is your return ON capital. But the real payoff over 101 years has come from the land’s steady appreciation. That 5.3 percent compound annual growth rate has turned $70 per acre in 1925 into $12,500 today. In other words, owners have not only earned income along the way; they have also gotten their original capital back many times over through value growth.

At the same time, many rural communities in District 4 and across South Dakota have seen a steady decline in population even as farmland values and agricultural productivity have risen dramatically. Our state’s economy remains heavily tied to agriculture, which is a real strength for those of us who live and work on the land. However, this limited and homogenous focus on farming has perhaps come at the expense of a more diversified and inclusive economy that could offer broader opportunities, help retain young families, and strengthen small towns throughout rural South Dakota.

This long-term, grounded growth, backed by actual sales data, is one reason family farms and rural communities in District 4 have endured through generations of change. It is not flashy Wall Street gains. It is real value created through hard work, good stewardship, and commitment to the land we all depend on.