Land and lease prices in the US are skyrocketing

The price of agricultural land in the US has risen sharply in the past six months. That writes the Federal Reserve Bank of Chicago in Agletter published last week. The demand for land has increased considerably in the past six months due to the higher grain and pig prices. The more expensive land is therefore no surprise to farmers and banks.

In the arable state of Iowa, arable land has become about 10% more expensive in a year, writes David Oppendahl in the bank's market vision. In the states of Indiana, Illinois, Iowa, Wisconsin and Michigan, land prices rose by an average of 6% in 2020, according to a survey conducted by the Federal Reserve Bank of Chicago among 143 agricultural banks in the states concerned. The average rent in the 5 states has increased by 2021% in 4 compared to 2020.

State aid
The trend of constant or declining land and lease prices of the past 7 years has thus been broken in this area. According to the banks, not only high prices for agricultural products play a role in the price of land. The United States Department of Agriculture (USDA) injected $24,1 billion into the agricultural sector last year with the Coronavirus Food Assistance Program. Nearly a quarter of this money ended up in the 5 Midwestern states. This development, in combination with relatively high raw material prices, is causing a sharp rise in land and lease prices, according to Oppendahl.

Less agricultural land has been sold in the past 6 months than in the same period last year. Demand for land has increased sharply in recent months, according to the banks that participated in the survey, but relatively little land is currently being offered for sale. Three quarters of the banks therefore believe that the price of land will rise even further in the second quarter of 2021. In absolute numbers, land is historically expensive, but adjusted for inflation, according to the Federal Reserve Bank of Chicago, the land and rent index remains below the 2013 level.

Jurphaas Lugtenburg

He is a market specialist in grains and other agricultural commodities at DCA Market Intelligence. He also focuses on onions, potatoes, and roughage. Jurphaas also runs an arable farm in Voorne-Putten (South Holland).

j.lugtenburg @boerenbusiness. Nl

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