3 Factors That Could Topple Farmland Values

January 23, 2019 06:00 AM
 
Since 2015, however, farmland prices have gone sideways. Could they be in for a big decline in value?

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.

 

  1. 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.
  2. U.S. dollar: A strong dollar could be bearish for crop prices.
  3. 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:

2019 Farmland Outlook: Values Stay Resilient

Farmland Under Pressure

Rural Bankers See Bearish Picture for Farmland Prices

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Comments

 
Spell Check

Bob
cooper, IA
1/24/2019 08:32 AM
 

  farmland value is not going anywhere drastically. Your premise that the value bottomed in the early 1990's is incorrect, at least in IOWA. We bottomed in 1986 as a result of Jimmy Carter's policy. By the early 1990's the price had risen to the 1200+ range which is far higher than anytime prior to 1976. Farmland will continue to rise as there is far less of it every year in the US.

 
 
Chuck
Jordan, MN
1/24/2019 12:11 PM
 

  This year, many landlords have lowered their land rents $30-$40 per acre to get more in line with cost of production. Combine that with historical data that rents and value are highly correlated (see Purdue University research) and its obvious where land values are going - down.

 
 
Geoff
Cedar Rapids, IA
1/24/2019 09:18 AM
 

  We reported in 2010 that Pelosi’s jet travel cost the Air Force $2,100,744.59 over a two-year period — $101,429.14 of which was for in-flight expenses, including food and alcohol. Some details: The average cost of an international CODEL was $228,563.33. Of the 103 Pelosi-led CODELs, 31 trips included members of the House Speaker’s family. One CODEL traveling through Tel Aviv, Israel, to Baghdad, Iraq, May 15-20, 2008, included members of Congress and their spouses and cost $17,931 per hour in aircraft alone. Purchases for the CODEL included: Johnny Walker Red scotch, Grey Goose vodka, E&J brandy, Bailey’s Irish Crème, Maker’s Mark whiskey, Courvoisier cognac, Bacardi Light rum, Jim Beam whiskey, Beefeater gin, Dewars scotch, Bombay Sapphire gin, Jack Daniels whiskey, Corona beer and several bottles of wine Copied from Fox news this morning. With expense tabs like this that are "leaders" are running up, is it any wonder Americans aren't concerned with debt? How many times have our politicians encouraged Americans to be financially frugal, pay off debt, or live within their means? I guess that would look pretty stupid, kinda like hiring the fox to guard the hen house?

 
 

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