US farmland prices explode

In September, the United States Department of Agriculture (USDA) announced that American farmers saw their land increase significantly in value last year. Arable land rose by almost 8% on average in price, the strongest increase in more than ten years. Can agricultural land prices rise further? Apparently so, because various sources now report that land prices in the US are exploding. This is especially true for farmland in the Midwest.

Low interest rates, high incomes
In this region, also referred to as the Corn Belt, agricultural land prices rose by 18% in the third quarter compared to the same period last year. The Federal Reserve Bank of Chicago recently reported. The causes for the price increases are low interest rates, government support and higher than normal agricultural incomes. The largest price increase was seen in the state of Iowa (+28%), followed by Indiana (+15%) and Illinois (+13%).

Several sources report that productive farmland in Illinois is currently selling consistently for amounts between $6.500 and $6.900 per acre. Transactions above $8.000 per hectare are also reported. By comparison, the average price for cropland across the US was $1.768 per hectare in September, according to USDA figures.

Index to record high
Current developments also ensure that the Long-Term Farmland Value Expectations Index from Purdue University reached a new record of 161 points in October. That is 2 points more than a month earlier. The short-term index rose by 1 point to 156. This makes the short-term index only 3 points below the record level reached last year. 

It should be noted that concerns about rising costs for farmers are starting to have a dampening effect on rental prices for agricultural land.