Bankers Survey Suggests Slowing in Farmland Prices
Apr 25, 2012
Farmland prices continue to rise but the pace of growth is slowing, according to Creighton University's April Rural Mainstreet Index. The Rural Mainstreet Index (RMI), which ranges between 0 and 100, declined to 57.1 in April from March’s strong 59.8. Creighton University economist Ernie Goss, who conducts the survey of rural bankers in approximately 200 rural communities with an average population of 1,300, says, “We are seeing some signs across the Rural Mainstreet economy that higher energy and fuel prices are slowing growth for areas dependent on agriculture. Furthermore, somewhat slower global growth has negatively affected some portions of the rural and agriculturally dependent economy.”
Farmland prices continue to increase according to bankers. However, that growth slowed for April as the index (which also ranges from 0 to 100) slumped to 69.4 from 78.7 in March. This is the 27th straight month the index has been above growth neutral. The farm equipment sales index rose to 62.4 from 61.5 in March.
“The Federal Reserve’s cheap money and low interest rate policies continue to support the agriculture sector, including farmland and farm equipment. However, higher energy prices and somewhat slower global growth are taking some of the air out of the farm sector,” states Goss.
This month bank CEOs were asked to estimate the share of farmland sold to nonfarm investors and the proportion of farmland sold for cash. Bankers indicated that more than one in five, or 21%, of sales were to nonfarm investors. Bankers also reported that approximately 29% of farmland sales were for cash.
“It is clear that nonfarm investor interest in purchasing farmland is growing. Furthermore, some land not previously used for farming is being converted to farmland,” says Goss.
Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.
In addition, click here for an in-depth article on what's ahead for farmland values written by Debbie Carlson and published in Barron's.
Drop me an email at email@example.com if interested in seeing a copy of the LandOwner newsletter.