The reversal in US farmland prices gathered pace, with the
market showing its worst performance for more than three years, undermined by
weakness in agricultural commodities.
Farmland prices, which declined in December for the first
time since 2009, extended their pace of decline this month, Creighton University
said, after a survey of lenders in leading agricultural states from North
Dakota to Illinois.
A price index "plunged" to 43.8, below the 50.0 level
indicating a neutral market, and last month's 47.0 figure, and representing the
lowest reading since October 2009.
Crop price drag
The decline reflects the reversal in crop prices, which saw Chicago
wheat futures fall 22% last year and corn futures tumble 40%.
"As agriculture commodity prices have moved lower, so have
farmland prices," Creighton economics professor Ernie Goss said.
The weakness had spread to the farm equipment market too,
which recorded an index figure of 41.0, also the weakest since October 2009.
The fall in crop prices "has significantly reduced farmers'
willingness to undertake major agriculture equipment purchases".
Professor Goss highlighted that low crop prices were not a
negative for all farmers, with lower grain prices, coupled with improved hopes
for consumer spending, meaning that "ranchers and livestock producers are
experiencing record prices and a very healthy economic outlook".
However, land prices fell in both livestock-focused states,
such as Wyoming, as well as Midwest cropping powerhouses such as Iowa, for
which the price index tumbled to 38.1 from 52.3 in December.
The survey is the second this week to highlight a slowdown
in the US farmland, after heady rates of price growth over the last five years
Farm Credit Services of America, part of the
government-linked Farm Credit System agricultural lender, on Wednesday said
that a review of 3,500 deals in four states - Iowa, Nebraska, South Dakota and
Wyoming – suggested that "the market for farmland is levelling off and in some
Mark Jensen, senior vice-president at Farm Credit Services
of America, said: "There's evidence that farmland prices may be on a slight
decline from record highs seen at the end of 2012 and for most of 2013."
While prices in Iowa, the top scorn and soybean producing
state, had risen by 3.4% overall in 2013, that disguised a fall of 2.8% in the
last half of the year, the lender said.
Iowa values had fallen 3.3% quarter on quarter in the
October-to-December period – if remaining nearly double their price five years