News Farmland
Low crop prices weigh on US land market
A decline in the prices of grain corn, soybeans and wheat is putting pressure on land prices in the United States. Livestock farmers have had a good year. In the long term, farmers and analysts remain positive. Increased uncertainty among farmers is also not helping the situation.
In Europe, and certainly the densely populated Netherlands, it is almost unthinkable that the prices of agricultural land will drop significantly. The thought alone. In the US, the opposite is true. The long-term trend may remain positive, but in the short term that is different. This is evident from research by Iowa State University (ISU).
Lower income, lower land price
Data collected by the ISU shows that farmland prices in Iowa have fallen 3,1 percent this year to $27.272 per acre. That’s consistent with sentiment in the state, where 58 percent of respondents say they expect land prices to fall next year. At the same time, 80 percent of those surveyed believe prices will rise in five years. The top two reasons are declining farm income and lower commodity prices.
The yield on agricultural land (the profit that remains at the bottom line after cultivation) for arable land this year is 8,61% in the US and 2,57% when all pasture is included. Potato growers have done relatively best, with almost 10% yield compared to 7% in the Corn Belt, for example. That is lower than the five- or ten-year average. "The income figures clearly show that companies with a diversified cropping plan are doing better than those with a one-sided corn-soybean cropping plan," says market analyst Dave Muth of brokerage ISPC (Iowa State and Peoples Company).
Livestock farmer performs better
What is remarkable is that the incomes of livestock farmers are rising above those of arable farmers for the first time. They are profiting from the lower grain prices, which allows them to buy cheaper feed. At the same time, the sales prices of milk and meat have remained stable. This also results in livestock farmers being more interested in buying land than their arable farming colleagues at the moment.
ISPC does not see a trend break in the land market, despite what you might expect due to high inflation and increased uncertainty around world politics and tariff walls. Peaks in sales prices cannot be ruled out, especially when multiple buyers are bidding against each other. At the same time, the trend has leveled off, with landowners selling land because the market is highly demanding.
Niels van der Boom
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