Farmland prices, which advanced for 21 years, couldn’t escape the worst plunge in real estate since the Great Depression.
The value of all land and buildings on farms averaged $2,100 an acre at the start of 2009, down 3.2 percent from a year earlier, the first decline since 1987, the U.S. Department of Agriculture said yesterday in an annual report. Prices in Corn Belt states including Iowa and Illinois fell 2.2 percent to $3,620 an acre. In Montana they plunged 22 percent to $700.
No U.S. real estate avoided the damage caused by subprime- mortgage defaults that sent home prices in cities down 19 percent last year and led to a 35 percent plunge in commercial values from an October 2007 peak. Farmland is starting to pick up and may return 10 percent a year as the recession eases, said Jeff Conrad at Hancock Agricultural Investment Group in Boston.
“The market is taking a breather, but demand fundamentals are still in place,” said Conrad, a managing director who helps oversee $1.1 billion of farmland that returned 4.4 percent in the year ended June 30. “Population, more western-style diets and land availability all point toward more growth.”
Corn, wheat and soybeans dropped from records last year as the first global recession since World War II worsened and farmers increased world grains production by 5 percent, according to International Grains Council figures. The USDA expects net-farm income to drop 20 percent this year to $71.3 billion from last year’s record.
Wheat fell 31 percent last year on the Chicago Board of Trade while soybeans declined 19 percent and corn 11 percent....MORE
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Finally a story from John Kenneth Galbraith:This tale is said to be told by John Kenneth Galbraith on himself. As a boy he lived on a farm in Canada. On the adjoining farm, lived a girl he was fond of. One day as they sat together on the top rail of the cattle pen they watched a bull servicing a cow. Galbraith turned to the girl, with what he hoped was a suggestive look, saying, "That looks like it would be fun." She replied, "Well.... She’s your cow."