Land Values Remain Fairly Strong Despite Sharp Drop in Farm Income

Led by weak crop prices and exacerbated by a sharp decline in livestock prices, particularly cattle, net farm income dropped significantly in 2015.

Nathan Kauffman, economist from the Federal Reserve Bank of Kansas City said Monday at the American Farm Bureau convention that he “sky is not falling but this is definitely a period of adjustment.”

He said that the drop in income has so far not been accompanied by a drop in farmland values. Among the factors that are driving the decrease in crop prices is a gradual buildup in the global supply of all major commodities, including corn, soybeans and wheat.

At the same time, key demand factors have also “softened significantly,” he said, specifically mentioning ethanol production, which has been nearly flat in the past few years, and U.S. exports to China, which have decreased steadily as growth has slowed in that market.

Add to that credit conditions, a strong dollar and a somewhat sluggish global economy, has made selling crops overseas more difficult.  Despite all these negatives, farmland values have remained relatively steady.

Source: NAFB