U.S. farm real estate values rode the express elevator to the penthouse during the commodity boom, gaining an average $860 an acre in five years. They are still at elevated levels despite the sharply lower farm income of recent years but may drift lower in the near term, according to two examinations of the farm economy.
The USDA forecast net farm income of $69.4 billion this year. If accurate, the total would be the third year of net income below $70 billion since 2015. “We’re starting to see ... a new average coming out here,” said USDA economist Carrie Litkowski on Wednesday.
Ag bankers in the Midwest say farmland values were steady overall in 2018 and rose by 1 percent in the final three months of the year, reported the Chicago Federal Reserve on Thursday in its quarterly AgLetter.
With a nationwide average of $4,130 an acre this year, the value of U.S. cropland is nearly unchanged from the 2014 average of $4,100 an acre, according to an annual USDA survey of producers.
Agricultural bankers reported a 1 percent rise in “good” farmland values in 2017 in a survey by the Chicago Federal Reserve Bank, which said the productivity of midwestern farmland had helped stabilize prices. It was the first increase in values since 2014.
An Iowa State University survey said the average acre of Iowa farmland rose in value by 2 percent in 2017, to $7,326, ending the first three-year decline in values since the agricultural crisis of the mid-1980s.
The Kansas City Federal Reserve Bank says the prolonged decline in farm income pushed farmland values lower in the central and northern Plains, "but at a modest pace" of 3 percent for non-irrigated land during the summer. The Chicago Federal Reserve Bank said land values, although relatively stable for the past year, fell 1 percent during the summer.
Property consultants Strutt and Parker said the price of cropland in England rose by 5 percent in the three months ending on Sept. 30, reversing a two-year decline, reported Agrimoney.
Farm income plummeted with the collapse of the commodity boom in 2013 yet cropland, usually a farmer's biggest asset and the foundation of a farm's financial health, is as valuable as ever, the USDA says. Producers are making enough money to pay their mortgages, aided in part by low interest rates on the loans, while the perennial hunger among farmers, ranchers and investors to buy land is bolstering prices on the national level, although the Midwest and northern Plains feel the pain of lower commodity prices.