Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Crop price declines extend fall in US land values

Twitter Linkedin

The latest leg down in crop prices, to levels below production costs for most producers, has quashed signs of recovery in the US farmland market, with values falling for an eighth successive month.

A farmland index compiled by Creighton University from major agricultural states such as Illinois, Iowa and Kansas retreated to 48.3 this month, continuing below the 50.0 level which indicates a neutral markets.

The decline reversed a June deceleration in the rate of price falls, a slowdown which Creighton had trumpeted as likely heralding a return to appreciation in farmland values.

However, Ernie Goss, Creighton University economics professor, said that a further lurch lower in land values had snuffed out signs of recovery.

"Much weaker crop prices are definitely taking some of the air out of agriculture land prices," he said.

"At this point in time, land prices appear to be moving gradually lower without significant volatility."

Making a loss

The extent of the drop in crop prices has already taken them below cost of production for many farmers, with only 7.0% of bankers that Creighton surveyed believing that growers in their area were making a profit with agricultural commodity values at current levels.

The decline in prosperity has also dented demand for farm machinery, with a Creighton index of farm equipment sales by dealers falling to 33.4, a 13th successive month of decline.

"Farmers have certainly become more cautious in their purchase of both additional land and equipment," Professor Goss said.

"This is having negative impacts on implement dealers across the region."

Default concerns

The decline in prosperity has also raised some concerns over a rise in farmer difficulty repaying debts, with 40% of bankers surveyed forecasting a rise in loan defaults over the next year, unless crop prices recover.

"A majority of agriculture borrowers have strong enough balance sheets to cover lower commodity prices for a short-term period, however, not for a sustained period," Todd Douglas, chief executive of First National Bank in Pierre, South Dakota, told the survey.

In Illinois, Fritz Kuhlmeier, chief executive of Citizens State Bank in Lena, said: "Cash margins and strong balance sheets will keep defaults modest for one year, but look out beyond that."

Data ahead

Further data on land prices and sector credit conditions will be revealed in the next round of quarterly Federal Reserve surveys, expected next month.

Indeed, not all commentators on land prices are so gloomy as Creighton, with Farm Credit Services of America earlier this week showing values rising by 1.5% in Nebraska and by 5.8% in South Dakota and Wyoming in the first half of 2015, if falling by 0.9% in Iowa.

The relative strength in Wyoming, a state strong in livestock, was attributed to improved margins for meat producers.

The six-month price difference of the benchmark farms was down 0.9 percent in Iowa, up 1.5 percent in Nebraska and up 5.8 percent in South Dakota and Wyoming, the report said. For the past year, values are down 3.7 percent in Iowa and up 2.2 percent in Nebraska, 13.6 percent in South Dakota and 9.5 percent in Wyoming


Twitter Linkedin
Related Stories

Evening markets: Wheat futures tumble to contract low, on US export downturn

Weak US export sales data hurt wheat prices, while depressing soybean futures too. But cotton prices buck the trend

Ag commodity prices face further pressure, says SocGen, urging sell bets

The bank sees scope for forward prices of the likes of corn, cotton, hogs and wheat falling well below investor expectations

Cotton top soft commodities bet for 2018, sugar the worst - Rabobank

Still, even sugar looks poised for price gains, as Brazilian output falls, the bank says. Cocoa, coffee outlooks score as reasonably bullish

Will the correct Argentine weather outlook please stand up

There appears a lack of consensus on what lies in store for the country, just as worries are growing of an imminent La Nina
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© 2017 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