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June 13, 2022
One of the questions in agriculture right now among many is: Will land prices go even higher than they are today? Farmers, landowners, and the agricultural industry are facing more uncertainty at this moment than in almost any other time. The Ukrainian war has thrown in a multitude of short and long-term unknowns in the food and ag world. Inputs, like fuel and fertilizer, are vastly more expensive, raising the cost to produce a crop, while feed costs are much higher for livestock producers. Grain prices are at historic levels, but will these go higher or lower? Will farmer buyers become more cautious in their outlook to bid up land if input costs and supply chain issues escalate?
Inflation and stability concerns have come to the forefront when making investment decisions. The demand for land has increased as it is generally accepted that farmland is a safe, secure, long-term investment during periods of inflation. Rising interest rates will increase the cost of land mortgages, which will have some damping effect on land prices. How far and how soon rates go up will determine the extent of the interest rate influence.
The importance of secure and adequate food, fiber, and fuel supplies has taken center stage throughout the world. U.S. agriculture, as the world's most productive and secure grain and livestock supplier, comes to the forefront of world trade now and into the future. Farmers realize the potential and are therefore willing to bid up land prices in order to control more acres for the years to come. Individual and fund investors are realizing this as well and have started to step more into the farmland market.
As we are well aware of today, anything can change on a moment's notice with weather, commodity markets, world events, and government actions. All will affect agriculture and therefore, the price of farmland. The supply of land for sale and how demand holds up over the next months will also be determining factors for land prices.
Even with current land prices at heightened levels, most of the supporting factors remain in place at this time to keep values steady to firmer for the next six months. This outlook could be altered at any moment due to unexpected changes in a multitude of factors.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|