Farmland prices in the US are set for a prolonged slowdown, after a faster-than-expected recovery, helped by growers' success in getting their crops sown early, a study has revealed.

Prices jumped by 4.5-6.3% over the last year, rebounding from declines the year before, as timely spring plantings coupled with depressed fertilizer costs "led to renewed optimism about crop margins", a report by Purdue University academics said.

"These two things together have promoted some increased optimism in the land market," said the briefing, which was based on a survey of land brokers, lenders and farm managers in Indiana.

"Farmland prices have risen higher than expected", reaching $5,310 an acre for high quality land.

"In 2009, some people were concerned that there might be a significant downward adjustment in farmland values. This did not occur."

'Optimism dissipated' 

However, forecasts for prices remained bleak, with respondents expecting a small fall in prices, of 0.1-0.3%, for the rest of the year.

While some two-third of those surveyed expected the market to rise over the next five years, their average hopes, of 1.9% inflation a year, were significantly lower than that achieved over the last 12 months.

One-in-eight of the experts forecast a fall of 11.9% by 2015.

"Combining all responses provided an expected total increase in farmland value for the next five years of 4.6%, an increase of 0.9% per year," the report said.

"While current farm income is providing support to the farmland market, the optimistic expectations about crop prices and thus production margins have dissipated."

Funds stay away 

The market was getting little support from rental incomes which, even for the best land, averaged 3.8%, a lower percentage than the year before, with low-quality farms yielding 3.5%

Both figures are significantly lower than the 5.8% average for the survey's 36-year history.

Furthermore, funds had shown little interest in farmland, in Indiana at least, with just 16% of respondents reporting an increase in buyers from outside agriculture.

"These changes seem to indicate that in 2010 there was not renewed interest on the part of investment funds," the report said.