Despite another year of low profit margins for farmers, rising interest rates and global economic uncertainty, the farmland market was flat to even slightly-higher in 2018.
But the growing season brought too much rain in some places and too little in others. Then the Chinese trade and tariff issues hit, which sank grain prices and optimism.
For 2019, Bruere says, he’ll be watching farmer buying versus investor buying.
Even among the farmer buying pool, trends are emerging. Buyers are being more selective of when, and how far they are willing to compete for and/or buy a farm, Hensley adds.
Looking forward, these factors will continue to pressure farmland values, says Jim Farrell, president of Farmer’s National Company in Omaha, Neb. Although, it’s hard to know to what extent.
The big question, he says, is will it continue to be a gradual correction, or will it accelerate?
Since hitting bottom in the early 1990s, the price of agricultural land has soared, rising 169% in real terms between 1994 and 2015, according to Erik Norland, executive director and senior economist of CME Group.
“Moreover, agricultural land values were largely untouched by the financial crisis, experiencing only a small dip in 2009,” he says. Since 2015, however, farmland prices have gone sideways. Could they be in for a big decline in value?
Interest rates: Farmland values seem to follow real interest rates and the value of agricultural production. Positive real rates might not be good for the value of U.S. farmland.
U.S. dollar: A strong dollar could be bearish for crop prices.
The price of key crops: What happens to farmland values in the future might depend upon whether higher crop prices offset the potentially negative influence of higher interest rates or whether lower prices for corn, soy and wheat compound them.
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