“U.S. cropland values hit a record this year, federal data shows. Prices for new and used farm equipment have soared, as rising sales and disruptions in key components, such as semiconductor chips, cause shortages and delivery delays for new machinery.”
The Journal article noted that, “Retail sales volumes of new high-horsepower tractors in the U.S. were up 27% from year-ago levels during the first eight months of 2021, according to the Association of Equipment Manufacturers. The red-hot machinery market has produced a windfall for manufacturers like Deere, whose profit from large farm equipment surged 50% in the company’s latest quarter.
‘It’s like the Wild West out there right now,’ said Scott Irwin, an agricultural economist at the University of Illinois, referring to the scramble for land and equipment.
“That helped spur a sharp reversal in farmers’ fortunes, with the USDA projecting this month that net farm income would surge 20% in 2021 to $113 billion, the highest since 2013.”
Monday’s article explained that, “Inflation is also hitting the Farm Belt, boosting almost all farmers’ production expenses this year, including fertilizer and fuel. The USDA expects production expenses to rise by more than 7% in 2021, the agency said. Farmers’ bills for supplies such as seed and fertilizer bought for next year will be the highest ever, [Michael Swanson, agricultural economist at Wells Fargo & Co., a major farm lender] said.
Luke Worrell provided an overview of some of the key farmland value findings from a recent survey of the #Illinois Society of Professional Farm Managers and Rural Appraisers during Thursday's farmdoc webinar (90 second clip).
“For now, the better prospects have farmers and investors competing fiercely for land. The value of U.S. cropland averaged a record $4,420 an acre this year, according to USDA data, an 8% increase from 2020. Farm real-estate values, a measure of the value of all land and buildings on farms, also hit an all-time high.”
farmdoc's Gary Schnitkey provided some historic context on the capitalization of farmland values during Thursday's webinar (one-minute clip). pic.twitter.com/HN76rTRDxR
The Journal article added that, “Farmers are also paying more to rent land, according to August reports from two regional Federal Reserve Banks. Cash rent on cropland was up 7% as of the second quarter versus year-ago levels, the largest increase since 2013, according to the Kansas City Fed region, which includes states such as Kansas and Nebraska. In the Minneapolis Fed region, cash rent for some land rose more than 9%.”
“Corn is currently trading around $5.25 a bushel. Mr. Irwin, of the University of Illinois, said he wouldn’t be surprised to see prices drop below $4 next year. The current period is similar to the mid-1970s, Mr. Irwin said, when surging grain prices and low interest rates drove farmland values higher before the 1980s farm crisis.
Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.
In an update from the Federal Reserve Bank of Kansas City earlier this month ("Larger Livestock Loans Boost Farm Lending"), Nathan Kauffman and Ty Kreitman stated that, "Demand for livestock loans grew in the third quarter, boosting agricultural lending activity at…
Bloomberg writers Kim Chipman and Elizabeth Elkin reported late last week that, "Skyrocketing fertilizer prices could lead U.S. corn profits to drop by about a quarter next year, potentially motivating farmers to shift millions of acres into less cost-intensive soybeans."
On Wednesday, the Federal Reserve Board released its October 2021 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.