Friday, November 11, 2016

"US Farmland Prices to Suffer 20% slump, MetLife Warns"

From January 2015's "U.S. Farmland Has Been the Top Performing Asset Over the Last 20 Years: Goodbye to all that":
The thing to keep in mind about farmland: It is worth the cash flow it can produce which ultimately means commodity prices rule. If memory serves, U.S. farmland has outperformed prime London residential....
The exception:  (unless you're on the edge of a metro area and have some non-public zoning info)

From Agrimoney:
US farmland prices are heading for their "first significant correction since the mid-1980s", MetLife Agricultural Finance said, as official data showed that, on some measures, market conditions were already the worst since then.

US land prices will fall by an average of 20% from their peak – typically set early last year – before the slump peters out in 2018, said MetLife, one of North America's largest agricultural mortgage lenders, blamed the decline on weaker farm profits.
While interest rates, one big determinant of farmland market fortunes, look likely to "remain low", cash receipts, that is income from produce sales, look set to remain depressed by the dent to prices from weak crops.
While corn and oilseed prices "will bottom" in the current 2016-17 marketing year, "we expect the low price environment to persist through 2017", given the record size of this-year's US corn and soybean harvests, MetLife said.
"As the world has increased output to meet demand, commodity prices have adjusted lower," the lender said.
"Declining cash receipts will lead to a reduction in inflation-adjusted farmland values by 2018, representing the first significant correction since the mid-1980s."
'Steepening declines'
The comments came even as data from the Federal Reserve, the US central bank, showed prices in Midwest states including the so-called "I" states of Illinois, Indiana and Iowa falling by 3% in the year to the July-to-September quarter.
The period "marked the fourth straight quarter of year-over-year declines" for farmland in the region, "the first time for such a streak since 1986–87", the Fed's Chicago bank said.
Meanwhile, separate data from the Fed's Kansas City bank showed values in the central and southern Plains, from Nebraska to Oklahoma, falling by more than 6% year on year, at the quickest rate since early 1987....

In February 2011 we noted:

...We've been following this trend for the last three years and have been asked when will it top?
One sign will be when Optima Fund Management brings their American Farmland Company public, still a few years away....
 They did the IPO on October 19, 2015.