According to the Federal Reserve Bank of Kansas City, the value of farmland in the western Farm Belt has skyrocketed in the third quarter of 2010. Driven by an increased demand for US agricultural products, prices for irrigated farmland have risen over 9% in the third quarter of 2009. Prices for other farmlands are keeping up with this increase as nonirrigated farmlands and ranchlands have increased in price 6.4% and 4.3% respectively.
This rise in farmland prices is a signal that the agricultural sector is recovering from the general economic recession that has paralyzed the country. Unlike the overall economy, which is still struggling with high unemployment and weak real-estate values, the US Department of Agriculture has estimated that net farm income in the US has increased nearly 25%, rising to roughly $77 billion. In addition to farmers, increased interest in farmland is being driven by nonfarm investors, looking to include hard assets with high rates of return in their portfolio.
Farmland has emerged as a valuable investment largely due to increased predictions for US agricultural markets. Russia’s Black Sea drought, which crippled its wheat exports, has provided an unexpected boon to US wheat farmers who are expected to export over 40% more bushels in this year’s harvest. The US is also exporting record amounts of soybeans and cotton, largely due to the weakness of the US dollar, which has made US commodities a bargain to developing nations such as China. The prices of cotton, corn, wheat, and soybeans are all up, 119%, 49%, 39% and 35% from last year.
This article courtesy of Farm Plus Financial. For information pertaining to financing opportunities contact us at 866-929-5585.
Written by: Justin Ellison / Farm Plus Financial staff writer