US farmland hits $20,000 an acre as market revives

The US farm economy is showing signs of reviving from a drought-induced decline, with farmland prices hitting $20,000 an acre in some areas, and a recovery in the agricultural equipment market too.

A farmland price index compiled by Creighton University rebounded to a four-month high of 61.6, from 52.8 in August, indicating price growth recovering in a rally that has now lasted for nearly three years.

Any figure above 50.0 indicates rising values.

Recovery was notably strong in Minnesota, where the price index rebounded to 71.1, and where a 27-acre parcel of land sold on Wednesday for $14,000 an acre, a record for its county, and only $1,000 an acre short of the state high reached in 2003, on University of Minnesota figures.

'More air into the price bubble'

However, some bankers questioned for the survey, covering US agricultural states from North Dakota to Kansas, "are reporting farmland prices as high as $20,000 per acre", said Creighton University economist Ernie Goss, who has voiced concerns over the extent of the rally.

"Despite the drought, farmers continue to put more air into the farmland price bubble."

And lenders overall forecast further price growth over the next year, although at a rate of 3%, below those recorded in in the past 12 months, and with 13% of bankers predicting a drop in values.

Farmland prices in areas that suffered the most from this year's drought "were expected to grow the least", the survey said.

'Dampen economic activity'

Professor Goss added that the drought "continues to dampen economic activity for agriculture equipment sellers", for which a sales index came in at 50.0, indicating sector stagnation.

Nonetheless, this was an improvement on the "very weak" 38.3 figure in August, when crop fears peaked.

Latest harvest reports have shown a slight improvement in corn yields, and better-than-expected soybean results which have prompted talk of the national yield topping 37 bushels per acre..

The US Department of Agriculture has pegged the crop at 35.3 bushels per acre.

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