Thursday, July 6, 2017

Farmland: "Bankers Turn Positive on Land Prices in US Cotton, Cattle Heartland"

Our standard boilerplate:
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)

Now whether the "worth" has any relation to what someone is willing to pay is another matter. And this article specifically talks about production we don't pay a lot of attention to, cattle and cotton. We are keeping an eye open for private equity to move into row crops and wheat but that's not happening in any big way, yet.

From Agrimoney:
Bankers have turned positive on farmland prices in the US cattle and cotton heartland for the first time in two years, in the latest of a series of signals that, at least, the worst may be over the sector's decline.

The proportion of lenders in the southern states of Texas, Louisiana and New Mexico expecting land price rises exceeded those foreseeing falls in values for the first time since the April-to-June quarter of 2015, according to a survey by the Federal Reserve, the US central bank.

"After seven consecutive negative quarters, the anticipated trend in the farmland values index turned positive" in the quarter which ended on Friday, the Federal Reserve said.
"Respondents expect farmland values to trend up in the upcoming months."
And the extent of optimism is the highest in nearly three years, with the gap between bullish lenders over bearish ones, at 7.0 percentage points, the highest since autumn 2014.
Actual values
In fact, lender sentiment in the region has somewhat lagged the movement in actual values, with prices of irrigated land and ranchland putting in a second successive period of quarter-on-quarter recovery in the April-to-June period, albeit of a modest 0.4% and 0.9% respectively.
Dryland values rose by 2.6%, but after a decline totalling 5.2% over the previous two quarters.
And there have been other signs of the US farmland market at least slowing its decline.
A monthly survey by Creighton University of values in major ag states, including the likes of Illinois, Indiana and Kansas, came in with an index figure of 40.0 for June.
'Improving farm commodity prices'
While still below the 50.0 level which indicates a neutral market, the Creighton survey reading was the highest but one in nearly three years.
Ernis Goss, the economics professor in charge of the survey, flagged the role of "stabilising and slightly improving farm commodity prices" in boosting the rural US economy....MORE
Yesterday: "Foreign Investment in U.S. Farmland on the Rise"

After the spike of the last couple weeks wheat is giving back some of the gains, down almost 4% today (19¢) at 536-0: