Signs appear of slowdown in US farmland market

A survey of bankers has indicated signs of the slowdown in the US farmland price growth forecast by the Federal Reserve earlier this week, showing appreciation slowing in states such as Illinois and Nebraska.

Prices of farmland in the main US cropping states remain on an upward path this month, Creighton University said, putting an index figure of 64.6 on the market, comfortably above the 50.0 level which indicates zero growth.

"Economic growth among countries importing US food, along with the Federal Reserve's cheap money policies, continue to boost farm income and support higher prices for agricultural land," Creighton Economist Ernie Goss said.

Indeed, fewer buyers are needing loans to buy land, with "very strong" farm income allowing "farmers to pay cash for their farmland purchases", he said.

Weaker states

However, the price index, drawn from a survey of bankers in states from Colorado to Iowa to Wyoming, notched up a second successive month of decline, since Professor Goss in March warned that the farmland price "bubble" was to lose some of its upward pressure.

Indeed, the index and was at its lowest level since August last year, and came in at levels below 55 in Missouri and Nebraska, while slowing to 56.0 in Illinois, the second-ranked corn and soybean producing state.

The data follow a caution in a report from the Federal Reserve's Chicago bank earlier this week that the rate of growth in US land prices may be about to slow from its heady pace at the start of the year.

And Mr Goss said that he expected softer agricultural commodity prices and slower global economic growth "to restrain growth in the months ahead" in the rural economy. 

Professor Goss based his March forecast of lower farmland prices ahead on ideas of "somewhat higher interest rates and softer agriculture commodity prices".

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