THE WISE AG UPDATE | Third Quarter, 2016
Think farmland values are headed for some tough times…a significant correction…or even a bursting “bubble”? Thinking of selling?
There is unquestionable uneasiness among farmland owners across the country. Soft commodity prices have recently dampened farm incomes and the near term future isn’t promising. Farmers looking for ways to control costs will certainly look to negotiating rents and terms. As a result some investors and investment advisors anticipate lower income and, ultimately, lower asset values.
However, as is often the case, the actual situation does not reflect the anticipated circumstances. There is actually less land on the market than in many past years and investors are generally maintaining their long term, patient approach. Recently Progressive Farmer quoted Bruce Sherrick of the University of Illinois. He said, “Land investors’ expectations of future income are more like climate, not weather. If it rains too much one season, it doesn’t mean the climate has changed any more than an abrupt correction in commodity prices necessarily undermines farmland values with a 30-50 year history of double digit appreciation.” The same article notes another respected analyst’s opinion that the “inventory” of land for sale is 40% lower than in peak years. With low inventory of properties available and investors maintaining and reinforcing their positions, the anticipated impact of falling farm incomes and soft commodity prices on land values has been muted. READ MORE…