Since hitting bottom in the early 1990s, the price of agricultural land has soared, rising 169% in real terms between 1994 and 2015, according to Erik Norland, executive director and senior economist of CME Group.
“Moreover, agricultural land values were largely untouched by the financial crisis, experiencing only a small dip in 2009,” he says.
Since 2015, however, farmland prices have gone sideways. Could they be in for a big decline in value? The answer depends on three factors, Norland says.
- Interest rates: Farmland values seem to follow real interest rates and the value of agricultural production. Positive real rates might hurt U.S. farmland values.
- U.S. dollar: A strong dollar could be bearish for crop prices.
- The price of key crops: What happens to farmland values in the future might depend upon whether higher crop prices offset the negative influence of higher interest rates or whether lower prices for corn, soybeans and wheat compound them.
Read more farmland price analysis:
The Shutdown Is Giving Giant Agriculture Traders an Edge
Tax Reform: The Good, Bad And Ugly