The slowdown in the land market in prime US wheat-growing
country gathered pace as an asset class which has already enjoyed huge gains
over the past decade proved less popular with buyers from outside agriculture.
Ranchland values even slid into a quarter-on-quarter decline
in the October-to-December period, according to data from the Federal Reserve's
Kansas City bank, covering states including Kansas, Oklahoma and Nebraska.
Cropland values rose, but by an average of only 1% quarter
on quarter, well below rates of some 7% in October-to-December periods from
"Cropland value gains slowed dramatically in the fourth
quarter," said the bank, adding that farmland markets in the region "may have
begun to cool".
On an annual basis, 2013 showed the weakest growth in three
The "sharp slowdown" came despite a drop in the amount of
farmland up for sale, a factor which in theory should have been supportive for
However, while farmers "continued to be the primary buyers",
interest from investors from outside the sector has waned.
The share of land purchased by non-farm buyers fell to 24%
last year from 37% in 2007.
The revival in world economic growth has meant many other
assets performing better, and competing more strongly for investors' attention.
For farmers themselves, extra land offers the chance to
spread fixed costs in the face of falling crop prices, although prices of many
other inputs remain buoyant.
Lenders surveyed by the bank "noted that while fertilizer
costs had declined 17% from their peak in May 2013, prices of other crop inputs
had not adjusted.
"In fact, seed prices continued to climb and have doubled
since 2007. Though more volatile, fuel costs have remained at a historically
high level for almost two years."
With farm profitability under pressure, a "growing number"
of lenders surveyed "felt that farmland values had topped out and could retreat
The proportion of respondents forecasting lower land prices
rose to 16%, compared with 1% at the end of last year.