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US farmland market at strongest since 2013

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The US farmland market has reached its strongest since 2013, according to a much-watched survey, flagging a “rapidly improving farm economy” also boosting the ag equipment market – and helping a key exchange traded fund to a record high.

 

Creighton University, in a monthly survey of lenders following by observers including outgoing US Department of Agriculture chief economist Robert Johansson, said that its index of farmland prices in major agricultural states had reached 56.3.

 

That was the highest reading since July 2013 for the index, for which any number above 50.0 indicates price expansion, and which showed contraction for all but five of the previous 85 months, a stretch going back to December 2013.

 

The growth came in period marked by “recent sharp improvements in agriculture commodity prices, federal farm support payments, and Federal Reserve’s record low short-term interest rates”, said Ernie Goss, the Creighton economics professor in charge of the survey.

 

MOO high

The recovery spread too to the farm machinery sector, for which Creighton reported a January index score of 54.5 – the highest since April 2013, and only its second positive reading in 90 months.

 

Professor Creighton highlighted too that “as a result of the rapidly improving farm economy, the farm exchange traded fund MOO traded on the New York Stock Exchange has risen to a record high.”

 

The VanEck Vectors Agribusiness exchange traded fund (ETF), which bears the ticker code MOO, on Thursday touched a record high of $83.66, up 7.4% for 2021 already, and near-doubling from a pandemic low set in March.

 

The S&P 500 index at its high of the last session stood up 2.8% for this year, and up 76% from its March low.

 

The VanEck Vectors Agribusiness ETF - which includes machinery makers Deere & Co and Kubota, trader Archer Daniels Midland, fertilizer-to-retail group Nutrien and livestock diagnostics business Idexx Laboratories among its top holdings – stood down 0.5% at $82.18 in afternoon deals on Friday, on a weak day for Wall Street shares.

 

‘Noticeably more bullish perspective’

The Creighton survey, based on data from states such as Illinois, Kansas and North Dakota, represents the latest in a series of improved snapshots of the farmland market, and the broader US agricultural economy.

 

Earlier this month, a monthly ag barometer compiled by CME Group and Purdue University came in at its second highest reading since it started in 2015, below only the record set in October.

 

“The farm income boost provided by the ongoing rally in crop prices appears to be the driving force behind the improvement in... the overall improvement in farmer sentiment,” CME Group and Purdue said.

 

This was in turn “reflected in a noticeably more bullish perspective on farmland values”, with 36% of farmers foreseeing price rises over the next year, a figure up 9 points month on month.

 

On the farmland price outlook over five years, “producers were even more optimistic”, with a record 65% forecasting growth.

 

‘Values all increased’

Meanwhile, the Federal Reserve’s Dallas bank, the central bank’s first member to release a farmland price survey for the October-to-December period, said that in its Texas and southern New Mexico territory, prices of “irrigated, ranchland and dryland values all increased” in the quarter.

 

Ranchland values showed particular growth, of 10.3% year on year, with irrigated crop land appreciating by 3.9%, and non-irrigated land by 4.4%.

 

The bank noted that land demand was coming in particular from investors, as well as developers, and highlighted expectations of further appreciation.

 

“The anticipated trend in farmland values index grew in fourth quarter, suggesting respondents expect farmland values to continue increasing.”

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