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Ranchland prices grow faster than cropland values

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Farmland values in wheat-growing parts of the US has grown faster than those in corn-growing areas last year, reflecting the relative fortunes of prices of the grains – and the return of rainfall.

The value of US farms overall has risen by 8.1% over the last year to an average of $2,950 per acre, the US Department of Agriculture said.

The rate of increase, a slowdown of 0.2 points on that reported for the year before, reflected an acceleration in ranchland - which appreciated by 11.1%, more than doubling its growth rate – overtaking a slowing cropland market.

The underperformance of arable land, of which price growth near-halved to 7.6%, tallies with the slide in corn, soybean and wheat prices over the past year, a factor which, while lowering margins for crop farmers, has improved prospects for livestock producers, who require grain for feed.

Corn Belt vs Wheat Belt

However, even among major arable areas there was a marked divergence in performance, with values in the Corn Belt growing by 8.4%, less than that in area where wheat makes up a bigger proportion of crops.

In the northern and central Plains – stretching from North Dakota, the top spring wheat growing state, in the north to Kansas, the biggest US producer of wheat overall – values rose by 16.3%.

And in the southern hard red winter wheat belt, prices in Oklahoma rose by 9.0%, and by 10.1% in Texas, also a major cotton-growing and cattle-ranching state.

Drought relief

The performance chimes with the relative performance of corn and wheat prices over the past year, with futures in the former tumbling by 28% in Chicago, where wheat has fallen by 22%.

It also appears to reflect the retreat in drought in many wheat-growing areas, where the worst-in-a-generation dryness which affected the US in 2012 remained a threat into this year.

In Texas, for instance, while 58% of the state remains in drought, that is down from 88% a year ago.

Texas, cropland prices rose 10.5% in the latest year, a big improvement from the 4.4% decline seen the year before.

Furthermore irrigated and non-irrigated cropland rose at identical paces in the latest year, compared with a marked divergence a year before, when watered land gained 2.4% while land without access to moisture fell 5.7%.

The performance of irrigated and non-irrigated cropland also converged in Nebraska, Oklahoma and in Kansas, where overall cropland values rose particularly swiftly, by 17.1%.


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