Your Precious Land
Mike Walsten has covered major business trends in agriculture for more than 40 years.
Rural Mainstreet Index Sees Rebound in Farmland
Oct 03, 2012
A bank-based farmland values index has firmed reversing a downward trend triggered by this year's drought. The farmland-price index portion of Creighton University's Rural Mainstreet Index (RMI) reversed course in September and climbed to 61.6, reports Creighton University economist Dr. Ernie Goss who conducts the monthly survey. The rise left the index at its highest level since May of this year and reversed three-months of decreases recorded by the index. The index was 52.8 in August.
“Bankers in some parts of the region are reporting farmland prices as high as $20,000 per acre. Despite the drought, farmers continue to put more air into the farmland price bubble. This is the 32nd consecutive month that the farmland-price index has risen above growth neutral. The farm-equipment-sales index rose to growth neutral 50.0 from August’s very weak 38.3,” said Goss.
This month, bank CEOs were asked to project farmland price growth for the next year. There was a great deal of variation across the 10-state region with an average gain of approximately 3% expected. Areas that suffered the most from the drought were expected to grow the least. Approximately 13% of the bankers expect price declines over the next year. This is up from 9% this time last when we asked the same question.
The RMI, which ranges from 0 to 100 with 50 representing growth neurtral, was up slightly for September at 48.3, from 47.1 in August and 47.9 in July. However, it was the third straight month the index has been below growth neutral. Observes Goss: “The drought continues to dampen economic activity for businesses linked to agriculture such as ethanol, and agriculture-equipment sellers. I expect food processors to take a hit later in the year as higher food prices work their way through the system.”
This month the survey asked bankers about the impact or expected impact of the implementation of the Dodd–Frank Wall Street Reform and Consumer Protection Act on their bank’s costs. Bank CEO’s, on average, expect their bank’s costs to grow by approximately 9% as a result of Dodd-Frank. Roughly 6% anticipate an increase of more than 15%, 36% expect an expansion of 10% to 15% with the remaining 58% forecasting an upturn of 2% to 9% resulting from the implementation of Dodd-Frank.
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