Low interest rates and the comparatively small amount of available farmland are combining with the healthy balance sheets of many farmers to limit the decline in land values, says an economist from the Kansas City Federal Reserve Bank. Speaking at the American Farm Bureau Federation convention, Nathan Kauffman of the Kansas City Fed said, “Farmland prices have been pretty slow to adjust,” reported the Des Moines Register. “There is just not a lot of land being sold.” Iowa farmland values fell 4 percent in 2015 while the USDA says net cash farm income, a gauge of solvency, fell 28 percent.
Kauffman said a plunge in land values like the agricultural recession of the mid-1980s “remains very unlikely,” reports the Register. In that episode, interest rates soared and commodity prices soured. “A repeat is unlikely because farmers now have significantly less debt, and interest rates remain low.”
Feedstuffs quoted Kauffman as saying, “Very-high-quality land is fetching very good prices” while less-productive land was seeing some decreases. Land rental rates also have been slow to adjust to the drop in commodity prices, he said. “It’s not what you would have expected when corn drops from $6 to $3″ a bushel.