Farmland values headed higher
(Idaho State Journal) - With agricultural commodity prices soaring, farmland values are on the rise and farm incomes are expected to follow.
That’s welcome news for Idaho’s economy since a University of Idaho study estimates agriculture is responsible for more than $20 billion in total sales in Idaho, 17 percent of the state’s jobs, 15 percent of wages and 17 percent of Idaho’s gross state product.
According to local and national farm economists, the increase in farmland prices is due to many factors, particularly low interest rates, increased demand for land by non-farmers looking for a safe investment, and high crop prices that have taken off since about June.
“Land is worth what you think its potential revenue stream is going to be,” says Paul Patterson, a University of Idaho agricultural economist in Idaho Falls. “If your potential income stream is going up, land values are going to go up as well.”
The U.S. Department of Agriculture releases statistics on farm real estate values in August and the latest numbers, which reflect farmland values as of Jan. 1, show only a modest increase.
Since that time, however, prices for major ag commodities have risen significantly virtually across the board, says John Anderson, an economist with American Farm Bureau Federation.
Sparked by a series of events affecting crops in other major countries, wheat, corn and cotton prices are all at multiyear highs. Prices for Idaho’s most important agricultural products — potatoes, grain, hay, milk, beef — are also on the rise.
“Since midsummer, the commodity price situation has changed quite a bit,” Anderson says.
Many farm experts, including the U.S. Department of Agriculture, Iowa State University and Wells Fargo & Co., the country’s largest agricultural lender, are predicting farm values and income will increase significantly this year, possibly to record levels.
USDA’s annual farm forecast that will be released later this month will be closely watched by ag observers.
The Kansas City Federal Reserve Bank released a report Nov. 12 that showed cropland values in the third quarter jumped as much as 12 percent in the seven-state region it tracks.
The San Francisco Federal Reserve Bank, which includes Idaho, doesn’t track farm data as closely, but Anderson says it’s very safe to say farm values are on the rise across the nation at similar rates.
“The same phenomenon has pretty much gone on everywhere across the nation,” he says. “It’s a similar phenomenon for similar reasons.”
Anderson says high commodity prices are certainly pushing ag land values up, but he believes low interest rates are the main reason for the rise.
“I think a lot of things are going on to influence the high ag land values, but the low interest rates are the primary variable,” he says.
That being the case, ag land values are susceptible to a correction if interest rates start to rise quickly, Anderson adds.
“If interest rates begin to rise, we could see those land values start to go the other direction,” he says. “It’s just something we want people to be aware of — to some extent, the high land values are tied to low interest rates.”
Idaho Farm Bureau Federation spokesman John Thompson says a lot of speculators are picking up farmland as they search for a safer place than the stock market to invest their money.
“Ag commodities are being viewed right now as a more stable place to invest money, which has translated into more demand for farmland,” Thompson says. “With low interest rates and the economy being the way it is, farmland is a good, safe investment.”
Patterson says it won’t be known for certain how ag land values in Idaho have changed until the USDA releases its annual farm real estate statistics next August. But he says the combination of higher crop prices, increased demand for farmland and low interest rates provides a pretty clear picture of where they are headed.
“All three of those factors would tend to indicate land values are going to be pushed higher,” he says.
http://www.journalnet.com/news/local/article_45e1c6da-f150-11df-a5fc-001cc4c03286.html
That’s welcome news for Idaho’s economy since a University of Idaho study estimates agriculture is responsible for more than $20 billion in total sales in Idaho, 17 percent of the state’s jobs, 15 percent of wages and 17 percent of Idaho’s gross state product.
According to local and national farm economists, the increase in farmland prices is due to many factors, particularly low interest rates, increased demand for land by non-farmers looking for a safe investment, and high crop prices that have taken off since about June.
“Land is worth what you think its potential revenue stream is going to be,” says Paul Patterson, a University of Idaho agricultural economist in Idaho Falls. “If your potential income stream is going up, land values are going to go up as well.”
The U.S. Department of Agriculture releases statistics on farm real estate values in August and the latest numbers, which reflect farmland values as of Jan. 1, show only a modest increase.
Since that time, however, prices for major ag commodities have risen significantly virtually across the board, says John Anderson, an economist with American Farm Bureau Federation.
Sparked by a series of events affecting crops in other major countries, wheat, corn and cotton prices are all at multiyear highs. Prices for Idaho’s most important agricultural products — potatoes, grain, hay, milk, beef — are also on the rise.
“Since midsummer, the commodity price situation has changed quite a bit,” Anderson says.
Many farm experts, including the U.S. Department of Agriculture, Iowa State University and Wells Fargo & Co., the country’s largest agricultural lender, are predicting farm values and income will increase significantly this year, possibly to record levels.
USDA’s annual farm forecast that will be released later this month will be closely watched by ag observers.
The Kansas City Federal Reserve Bank released a report Nov. 12 that showed cropland values in the third quarter jumped as much as 12 percent in the seven-state region it tracks.
The San Francisco Federal Reserve Bank, which includes Idaho, doesn’t track farm data as closely, but Anderson says it’s very safe to say farm values are on the rise across the nation at similar rates.
“The same phenomenon has pretty much gone on everywhere across the nation,” he says. “It’s a similar phenomenon for similar reasons.”
Anderson says high commodity prices are certainly pushing ag land values up, but he believes low interest rates are the main reason for the rise.
“I think a lot of things are going on to influence the high ag land values, but the low interest rates are the primary variable,” he says.
That being the case, ag land values are susceptible to a correction if interest rates start to rise quickly, Anderson adds.
“If interest rates begin to rise, we could see those land values start to go the other direction,” he says. “It’s just something we want people to be aware of — to some extent, the high land values are tied to low interest rates.”
Idaho Farm Bureau Federation spokesman John Thompson says a lot of speculators are picking up farmland as they search for a safer place than the stock market to invest their money.
“Ag commodities are being viewed right now as a more stable place to invest money, which has translated into more demand for farmland,” Thompson says. “With low interest rates and the economy being the way it is, farmland is a good, safe investment.”
Patterson says it won’t be known for certain how ag land values in Idaho have changed until the USDA releases its annual farm real estate statistics next August. But he says the combination of higher crop prices, increased demand for farmland and low interest rates provides a pretty clear picture of where they are headed.
“All three of those factors would tend to indicate land values are going to be pushed higher,” he says.
http://www.journalnet.com/news/local/article_45e1c6da-f150-11df-a5fc-001cc4c03286.html
Posted by Colvin & Co. at 11/18/2010 5:17 AM 
Categories: Farmland
Tags: agriculture farming food farmland USDA
Categories: Farmland
Tags: agriculture farming food farmland USDA
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