Farmland prices fell in the US for a ninth successive month,
amid worsening agriculture sector sentiment which has sent conditions in the
farm machinery market to the worst in at least nine years.
An index compiled by Creighton University of farmland prices
major US farming states such as Illinois, Iowa and Kansas came in at 41.4 for
this month, below the 48.3 points recorded for July, and the 50.0 mark that
indicates a neutral market.
The deterioration, which included particularly weak readings
for the western Midwest states of Nebraska and South Dakota, reflected the drop
in grain prices which has curtailed farm profitability.
"Agriculture commodity prices have plummeted for crop
farmers in our region and are expected to move even lower in the months ahead,"
said Ernie Goss, the Creighton University economics professor in charge of the
"Much weaker crop prices are taking the air out of
agriculture land prices."
'Lowest reading we
The drop in crop values is also having a broader impact on the
rural US economy, besides the farm equipment market which saw an index reading
of 25.5, a record low, below the "very weak" reading of 33.4 for July.
"This is lowest reading that we have recorded for the
equipment index since we began the monthly survey in 2006," Professor Goss said.
"The rapid decline in agriculture commodity prices is
causing farmers to become more cautious in their equipment purchase."
The finding follows a series of downbeat comments from farm
equipment groups over the sector, with Deere & Co last week lowering
forecasts for full-year sales and earnings, following a cut to profits guidance
last month by rival Agco, the maker of Massey Ferguson tractors.
Other groups cautioning
over the sector include equipment dealer Titan Machinery, irrigator maker
Lindsay Corp and AgJunction, a maker of satellite-based products, which said
that "These business cycles are typical of the industry in which we operate and
are being felt by both our customers and competitors".
Data from the Association of Equipment Manufacturer industry
group show the decline affecting in particular larger machinery, favoured by crop
farmers, with US sales of four wheel drive tractors down 11.0% in the first
seven months of 2014, with combine volumes dropping 15.2%.
Sales of smaller tractors have grown by 3.3%, supported by
the boost lower crop prices have given to livestock producers, major buyers of less
Creighton said that its research, drawn from a survey of
lenders, had indicated expectations of further weakness to come in the agricultural
"With record crop supplies anticipated by analysts, I expect
readings to move even lower in the months ahead," Professor Goss said.
Bank chief executives interviewed by the bank expect land
prices to fall by 4.8% over the next 12 months, an increase from a rate of
decline of 3.2% expected at the start of the year.
"Clearly, bankers are becoming more pessimistic regarding
the trend in farmland prices," he said.