Even though we think we'll see some upward price pressure come late summer, after a meandering downtrend, the reality of farmland investment is that it is only worth a multiple of the cash flow.
(unless you're on the edge of a metro area and have some non-public zoning info)
Top economist makes case for steady land prices, despite ag downturn
Corn 360-6 up 0-2Pressure on US land values may stay constrained despite the losses many growers face, one of the country's top ag economists said, noting the extent of farmers' reserves left over from more prosperous times.Robert Johansson, chief economist at the US Department of Agriculture, flagged the extent to which land prices had soared during more prosperous times for agriculture."When US farm income boomed, land values rose as well," Dr Johansson said, citing annual growth rates which reached 20% earlier in the decade.However, he did not suggest that the sharp decline in agricultural income of late would prompt an equally rapid reversal.Rental measureCertainly, recent data from the Federal Reserve on land values in key Plains and Midwest states "show that land values might have hit a plateau", Dr Johansson told the USDA's Outlook forum."In general, farmland values in the region have been weakening lately."However, judged by cash rents – and calculating a value from capitalising this revenue stream – current land prices "could make sense in some regions."The present value of the income stream remains above the average land value in the Corn Belt,"Running at a lossThis was the case even if making an allowance for higher interest rates, or an easing in rents - which appears possible, given the weaker profitability prospects farmers face....MORE
Wheat 455-9 up 1-0