Are lower farmland prices on the way?

Are lower farmland prices on the way?

Low corn and soybean prices and an expected increase in interest rates may put an end to farmland value increases, says Michael Langemeier, associate director of the Center for Commercial Agriculture, Purdue University. He says, however, that any decline will be slight and spread over more than a year.

"We are looking at about a 5-10% correction over each of the next three years," he said. "It's normal for a market that has been so strong to take a little breather."

According to the Purdue Farmland Value Survey, Indiana farmland nearly tripled in value from 2003 to 2013, rising from an average of $2,509 per acre to $7,446 per acre.

Langemeier said the rally was due in large part to the increased production of corn-based ethanol and strong export markets for soybeans, which drove crop prices higher and made farmland a more attractive investment.

But corn and soybean prices have been in a tailspin recently, falling to their lowest levels in five years on expectations of a record yield and a large global grain surplus.

"Commodity prices do have an impact on farmland values, but they're not the only factor," Langemeier said. "What happens with interest rates will also help determine the severity and length of any downturn in farmland values."

Read more about lower famland prices and the impact interest rates have on those prices.


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