Numerous farmland surveys (Iowa State, KC Fed, Chicago Fed, Purdue) now seem to be clearly indicating what many had expected for some time, farmland values are heading lower. This is not surprising given how sharply farm incomes have fallen. As we pointed out last year, the declines in income have pushed the rate of return to owner operated farmland very low.
Given that both cash rents and farmland values have started to decline, we thought that it would be interesting to examine these values and the current level of farmland capitalization rates on farmland. Continue reading →
As we discussed in these May posts (1, 2) most indications are that prices for U.S. row crop farmland are now softening, bringing an end to a tremendous run of increases for farmland values. We thought it would be useful to take a look at how far farmland values have come and some different measures of farmland valuation in order to gain insights into where prices might be headed. Continue reading →
The value of farmland is dependent upon expectations of the future revenue and the costs associated with the land. Expected earnings are difficult to accurately predict. For example, the income generated by farmers started rising well before farmland values shot up. As market participants began to realize that farm incomes might remain at elevated levels for some time, land values increased rapidly. Now, farm incomes are falling and one is left to wonder what the implications of these lower incomes are for farmland values. The answer will likely depend upon how market participants expect revenues and costs to adjust going forward. Continue reading →