Farmland Price Index highest since October 2008
Jan 25, 2010
The overall Rural Mainstreet Index (RMI) continued its climb to an 18-month high according to Creighton University’s November survey of bank CEOs in an 11-state region. The RMI rose to 41.0, which is just 0.1 higher than last month, and still considerably below growth neutral 50.0. The farm equipment index and the farmland price index rose to their highest marks since October 2008 at 47.2 and 47.4 respectively. The confidence index, which estimates the economy six months out, continued its rally to 59.7, while the loan volume index proved that credit is tightening on Rural Mainstreet by decreasing to a record low 33.4.
The farmland price index increased to 47.4, continuing a five-month rally to an 18-month high, but it marks the15th consecutive month below 50.0. Some states have reported farmland price indexes over 50.0. North Dakota’s index increased to 52.6, while Nebraska has had limited, but strong land sales. “Our farmland sales have been very limited but have set record highs as they occur,” noted John Nelsen, president of First Tier Bank in Holdrege.
Bank CEOs were asked by how much farmland prices have changed over the past six months. Most bankers, 41%, replied that prices have not changed while 31% said that prices have declined and 28% said prices have inclined. 11% of CEOs noted that farmland price increases have been of more than 5%.
Farm equipment sales rose in January to an 18-month high of 47.2 from December’s 40.4. What a difference one year has made in farm equipment sales. January 2009’s index was at a record low 29.4.
CEOs have a strong outlook on the economy six months from now. The confidence index rose to 59.7, which is the highest since June of 2007. The index has been above growth neutral for four consecutive months now indicating a solid outlook for an expanding economy.
Despite the U.S. government encouraging lending, the loan volume index slumped to a record low of 33.4. The index has been below 50.0 since June of 2009.
The increase in index levels from farmland prices, farm equipment, confidence, and the overall Rural Mainstreet came as great news. Even though farmland price and farm equipment sales indexes are below 50.0, they are building on strong gains. It shouldn’t be too long before the farmland price index breaks into positive growth.
The RMI has continued its increase, but has still remained below 50.0. “The RMI has remained below growth neutral for 23 consecutive months. The uncertainty surrounding legislative changes coming from Washington combined with economic weakness among Mainstreet businesses linked to the farm sector appear to be weighing on the rural, agriculturally dependent economy,” said Creighton University economist Ernie Goss. Any increase in the RMI is nice to see, but a break into the 50s would be outstanding.
Average farmland prices are on the brink of increasing in many of the 11 states surveyed. As we have said before, buying farmland is a great investment, and catching land at a stable price is historically a rare occurrence. As the farmland price index approaches 50.0, watch for other reports of farmland values on the rise.
Read more about agriculture and farmland at farmlandforecast.colvin-co.com