American farm real estate averaged $4,500 an acre this year. Sites in Northern Virginia and the Northeast with dependable access to the power grid sold for more than $8 million an acre last year.
CNBC reported the land rush on Sunday. Buyers spent about $6 billion on land for future data centers in the first half of this year, 79 percent more than a year earlier, and data centers now account for 27 percent of American development sites, second only to apartment buildings. At a protest in Lubbock in July, the Texas agriculture commissioner said developers sometimes pay ten times what the land is worth, which makes it hard for a farmer to refuse.
The premium is not for the soil. It is for an interconnection. A parcel with a firm path to grid power can be built on; one without it waits. That is why buyers are purchasing land for data centers that do not exist yet, and why two identical fields on either side of a substation are not worth the same money. What the farmer is selling is a queue position.
That queue is not free, and the bill goes somewhere. PJM, the grid that runs from New Jersey to Chicago and serves 67 million people, held a capacity auction in December. Its independent market monitor found that data center load accounted for $6.5 billion of the $16.4 billion it cost — and that roughly $6.2 billion of that was for data centers that have not been built. Across the last three of those auctions, forecast data center demand above what existing centers already use came to $21.3 billion of $47.2 billion. Capacity costs are paid by electricity customers.
None of that means the farmland market has been swept away. USDA's record $4,500 average was up 3.4 percent, the slowest annual gain of the current run, and ordinary agricultural land is mostly not part of this story. PJM says it is working the problem, through price caps, new transmission projects and market rule changes, and its own filings blame generator retirements, permitting delays and supply chain constraints alongside the load growth.
The monitor's own language is blunt — data center load growth, it wrote, is the primary reason for the tight supply, the shortfall in cleared capacity and the high prices. Wells Fargo and Morgan Stanley analysts have started treating local opposition to new sites as a material risk to the buildout.
The seller is not selling dirt, and the buyer is not paying for dirt. What changes hands is a place in line for electricity. The people already in that line pay for it, including for the buildings that have not been built.
What the farmer is selling is a queue position.
