Last Holdout of Crop Rout Gives Way as U.S. Farmland Value Drops

August 8, 2016 07:26 AM
Last Holdout of Crop Rout Gives Way as U.S. Farmland Value Drops

U.S. farmland values this year dropped for only the second time since a 1980s farm crisis prompted a wave of foreclosures, drawing warnings of harder times ahead.

Farmland values in the lower 48 states, including land used for crops and for livestock, declined $10 to $3,010 an acre, the first drop since 2009, the U.S. Department of Agriculture said Friday in a report. Cropland declined 1 percent to $4,090 an acre, while pastureland was unchanged at $1,330 an acre.

Farm income has slumped since 2013, but land values had so far held out even as crop prices tumbled. Now, the trend in land prices is likely to be similar to the 1980s, when values fell for three years, said Brent Gloy, an agricultural economist at Purdue University in West Lafayette, Indiana, and a farmer in southwest Nebraska. While the current skid may not match the magnitude of that slump, the decline probably will continue, he said.

“It’s going to be soft for another year, at least,” he said in a telephone interview. “We haven’t worked through the magnitude of the drop in commodity prices.”

Corn Belt

Losses were highest in the Northern Plains. The biggest drop was in Kansas, down 7.4 percent to $1,880 an acre. The Corn Belt remained the most-expensive region, even as prices fell 0.9 percent to $6,290 an acre. Rhode Island is the costliest state to own farmland, at $13,800 an acre, while New Mexico is cheapest, at $520 an acre.

Declines have been mostly "measured," said Randy Dickhut, senior vice president for real estate at Farmers National Company in Omaha, Nebraska, which manages more than 5,000 farms and ranches in 26 states.

"Demand is lower, but supply is also lower," which is keeping prices from falling more dramatically, he said. Higher-yielding land is tending to hold prices better than lower-quality land put into production during the crop boom, he added.

Still, farmers and investors have largely come to grips that the days of steep price runups are over, he said. “Sellers have to be more realistic about what they’ll get for their land,” he said.

Corn and soybeans, the two most-valuable U.S. crops, have dropped from records in 2012. As of Friday, the grain fell 61 percent to $3.3425 a bushel from the all-time high of $8.49, while the oilseed declined 45 percent.

In February, the USDA said declining commodity prices will push farm income down 2.8 percent to $54.8 billion this year, less than half the 2013 record.

The next forecast on income is set for Aug. 30.

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Spell Check

Kearney, NE
8/8/2016 09:53 PM

  Land is way over priced compared to the value of what it can produce. Ultra low interest rates keep land high priced. Until land rent pays less than having money in the bank, land will not drop like fundamentals say it should. The ZIRP program of the Fed will haunt us for years.

Harn Soper
Santa Fe, NM
8/9/2016 01:05 AM

  It is a great time to buy farmland if you know where to farm, what to farm and how to farm. Farmland values are measured by their production using conventional GMO crops as the determining factor. Currently GMO crop prices are in the tank (corn @ $3.26/bu), often below the cost of production. IN IOWA: In contrast, in 2015 our Iowa family farm's organic corn hit and average yield of 190 bu/acre at $12.10/bu. This compared to the average 2015 Iowa conventional GMO corn yield of 186 bu/acre averaging $3.67/bu. IN IOWA: Our 2015 organic oats yielded an astounding 132 bu/acre at $6.75/bu compared to an average conventional oats yield of 73 bu/ace at $2.34/bu. This is a great time to buy conventional farmland and convert it to organic. Harn Soper: Sustainable Farm Partners