The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Food Demand Drives Farmland Prices
Jun 14, 2010
I try to skim a few of the major Mid-West farm cities and theOmaha World-Herald recently had an article on how food demand is driving farmland prices higher. There was a regional conference in Omaha sponsored by the Federal Reserve of Kansas City. The meeting brought forth various good nuggets of information about the rising demand for food and how it is affecting farmland prices.
In 2005, the world produced about 7 billion tons of food which is about on average a ton of food per person on the earth. By 2030, which is only 20 years away, rising population will require another 3-4 billion tons of food to be produced.
This strong increase in demand encourages long-term investors to realize that good farmland is already in production and only marginal farmland will come into production over the next 20 years or good farmland will be taking away by suburban growth. According to the speakers, this demand will cause farmland prices to continue to increase.
Farmers National Co. of Omaha reported that recent sales of good quality farmland reached $8,000 an acre in Illinois, $7,500 in Iowa and $7,000 in Nebraska. Demand is high for ground that can grow corn and beans and prices are up since there is so little ground is for sale.
Even grassland values are drawing higher prices. For example, grassland sold neer O'Neill, Neb. recently sold for $580 per acre, substantially higher than the recent sales range of between $385 and $450 per acre.
As more people in the world move from rural to urban areas, their demand for animal products will increase. One of the drawbacks of this move is that a pound of beef requires 1,800 gallons of water to grow while a pound of wheat only requires 180 gallons. We will have to use water more efficiently in the future than we are now to keep up with this demand.
While many factors point toward health agricultural growth, there are serious challenges, including an imbalance in labor, environmental concerns, unwise public policy decisions in some countries and higher food prices that strain developing countries budgets.