RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Bankers upbeat over US farmland prices

Twitter Linkedin

Sentiment over the US farmland market remain upbeat even after a third successive year of strong gains, matching those of the mid-1970s run which heralded the early 1980s collapse in prices.

US farmland prices jumped in 2012 by up to 34% – for irrigated land in Kansas – despite drought damage to the country's harvests, as high crop prices and insurance claims expected to hit a record $21bn supported agricultural finance, the US central bank, the Federal Reserve, said.

In major Midwest states including Illinois, Indiana and Iowa, the top corn and soybean producing state, values have risen by 52% since the farmland price rally restarted in 2010, following the world financial crisis.

This matched "the fastest gain of the 1970s boom, over the period 1974-76, in real terms", the Fed network's Chicago bank said.

The extent of the rally has provoked concerns over the ability of outsiders to enter agriculture, with bankers telling the Fed that these young or prospective farmers were "having difficulties acquiring land at today's high prices, due to their holding less equity", in terms of existing land.

'Momentum still exists'

Nonetheless, with 43% of bankers telling the Chicago Fed that they expected higher levels of land purchases this year than in 2012, compared with 15% foreseeing lower activity, sentiment indicates "that momentum for rising farmland values still exists on the demand side in the year ahead", the bank said.

All but 1% of bankers surveyed foresaw land prices staying stable or appreciating in the current quarter in the Chicago Fed region.

The Fed's St Louis bank, which covers states further south, such as Arkansas , as well as parts of Indiana, also indicated a strong majority of opinion in favour of rising prices.

"Bankers expect land values and cash rents to continue rising," the St Louis Fed said.

Pay extra for water

It added that "gains in quality farmland are generally expected to outpace gains in ranchland or pastureland (non-irrigated)" – a trend reflected too in the latest quarter.

Fed data from Plains states such as Kansas, Missouri and Nebraska showed irrigated land rising by 30% over 2012, ahead of a 25% rise for plots without access to watering.

"Since the onset of the 2011 drought, annual gains in irrigated cropland have outpaced gains in non-irrigated cropland by 3% on average," having historically moved in tandem, the Fed's Kansas City bank said.

It also flagged an increase of purchases of land for non-farming purposes, such as recreation or housing, after four years of decline.

Tax change

The latest gains in land prices defy concerns earlier in 2012 that the prospect of a hike in capital gains tax rates, as the US attempted to balance its books, would undermine the market - encouraging sellers to make the most of lower levy rates, while discouraging buyers.

As it is, the US capital gains tax changes proved to be relatively minor, with the rate raised from 15% to 20% for individuals with incomes of more than $400,000, or couples earning more than $450,000.

By Agrimoney.com

Twitter Linkedin
Related Stories

Weekly grain, oilseeds market view from Europe

What does Vivergo ethanol plant shutdown mean for UK wheat?... Eu wheat export prospects... EU rapeseed imports...

Evening markets: export data hold sway in ag markets - helping cotton

... but not corn and soybean futures. Wheat futures fare a bit better, despite talk of Russia strengthening its grip on world trade

Morning markets: Wheat futures recover. But key tests for revival await...

Wheat futures shy away from contract lows. But a series of export market tests await. Palm oil looks for its first gains in six sessions

Evening markets: wheat plunges close to contract low, while US data lift soyoil

Wheat futures make attempt to follow corn in setting a contract low. But soy prices get a boost from US crush data
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069