Land market struggles, despite crop price rebounds

The rebound in crop prices has yet to be reflected in a reviving US farmland market, with the decline in real estate values accelerating to its fastest rate since the depths of the world economic crisis.

An index of US farmland values compiled by Creighton University fell to 40.9 last month, the lowest in five years, and well below the 50.0 level indicating a neutral market.

The decline was reflected across the range of areas, from Wyoming, a largely livestock-producing state, to Iowa, the top producer of corn and soybeans.

And it defied a rebound since late January in agricultural commodity prices, whose retreat had been seen as a big driver of the downturn in the farmland market.

Corn and soybean prices have recovered more than 10% since the end of January, with Chicago wheat futures up by one-quarter.

'Very weak sales'

The crop price recovery has also yet to feed through into the farm equipment sector, which showed shrinkage in business for a nine successive month, retreating to its weakest since May 2009.

"Agriculture equipment and implement dealers in the agriculture based areas are experiencing very weak sales to farmers," Creighton economics professor Ernie Goss said, if adding that machinery makers "are experiencing positive growth due to healthy sales abroad".

Earlier this week, AgJunction, a US-based maker of satellite-based agricultural equipment, highlighted the contrast between thriving foreign business and a slower domestic market.

Indeed, the US rural economy as a whole remains stagnant.

"We will need to see additional increases in farm commodity prices to push the agriculture-based economy back into healthy growth territory such as was experienced in 2012 and early 2013," Professor Goss said.

'Put the brakes on'

Separately, farm industry leaders in Illinois also highlighted the impact of lower crop market on farmland values, noting declines of 2% in the price of top-quality farmland in the state last year, of up to 7% in worse-quality sites.

"Sharply lower grain prices have diminished earnings projections and put the brakes on the uptrend in farmland values," said Dale Aupperle, of the Illinois Society of Professional Farm Managers and Rural Appraisers, which released the data.

While the market did not appear to be in a "bubble", Mr Aupperle forecast that "a more normal time for farmland prices may be in store for the next several years.

"Commodity prices have led to this situation."

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