News Farmland
High interest rates throw anchor for land prices
The ever-rising interest rates are slowing down the rise in land prices in the United States (US). Prices on the commodity markets also influence the investment climate in the land market, two US federal banks report. In the United States, land prices have risen sharply in the last three years.
As of 2020, the average value of an acre (0,4 hectare) has grown by a third according to Numbers from the U.S. Department of Agriculture USDA. For 2023, the ministry calculates with $ 4.080 per acre of arable land, the equivalent of € 12.320 per hectare. An increase of 8% by 2022. A lot less is paid for grassland: €3.971 per hectare.
Big differences
Prices for arable land remained fairly stable between 2014 and 2021, before peaking sharply in the past three years. For the most expensive land you have to be in California. There the average is €35.834 per hectare. Also in places in the Midwest, the price is quite reasonable by American standards. That is quite a difference with Montana, for example. There, a hectare of arable land costs €2.640. This of course reflects the earning capacity of the land and the pressure on the land.
Federal bankers in Chicago and Kansas City expect to see a stabilization in land prices after this year. The lower prices for soya and grain maize in particular, but also wheat and other grains, mean that interest in land is decreasing. But the prices of pork and milk have also fallen considerably in a year. This results in lower operating income. At the same time, production costs have increased.
Higher interest rates
What is a major brake on a further price increase is the rapidly increasing interest rates. Analysts therefore take into account that US land prices will stabilize or even fall, because the value of the land and the revenue model do not keep pace. Depending on the state, drought also plays a major role, which has a major impact on operating results. It should come as no surprise that the prices for land that can or cannot be irrigated vary considerably. For example, the difference in potato state Idaho is about € 9.859 per hectare. In California, that difference is a whopping $21.888.
Niels van der Boom
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