Farmland is worth it's discounted cash flow. Period.
It may sell for more but at some point it returns to trend.
It may sell for more but at some point it returns to trend.
It can correct either in price or in time.
That's me, quoting myself.
CME corn (Dec. i.e. new crop) 500'4 after trading as low as 494'4. September is at 541. Big backwardation.
From Agrimoney:
Growth in US land prices continued a gentle decline, with values falling in some major producing states, as expectations of a drop in farm incomes raises expectations of a further slowdown.Farmland prices in major US agricultural states have continued to rise this month, with an index compiled by Creighton University at 58.2. Any figure above 50.0 indicates an increase.However, the increase was slightly lower than the 58.4 in June, and represented the seventh drop in growth in the past eight months.And a further slowdown looks on its way, the university said, given falling grain prices, which are depressing prospects for farm profits.Indeed, bankers surveyed for the land report forecast, on average, a drop of 3% in farm incomes in 2013.'Growth to weaken'"Lower farm commodity prices and expected declines in farm income are slowing growth in farmland prices," Creighton University economist Ernie Goss said."I expect farmland price growth to continue to weaken."The comments echo a caution from Craig Dobbins, professor of agricultural economics at Purdue University, that "we may, indeed, see a downward direction in land values".With interest rates ultimately to rise, and farm income growth to be "lower than it has been in the past", the market faces "headwinds" that mean "it is going to be more difficult for land values to go up....MORE
Here are the highlights from Creighton's Rural Mainstreet Index, July 2013:
- Rural Mainstreet Index indicates rural economy expansion continues at healthy pace.
- On average, bankers expect farm income this year to be down by 3 percent from last year.
- More than one-third of bankers report impacts from federal spending sequestration.
- More than three fourths of bankers consider passage of a new farm bill as very important to the Rural Mainstreet economy.
- Farmland price growth slowed for the seventh time in past eight months.
Previously:
