Farmland Prices: Safety Zone or Another Bubble?

Written By Brianna Panzica

Posted November 29, 2011

Farmland prices are soaring in the Midwest United States.

CNN Money reports that in some areas, prices have jumped as much as 25%, and analysts expect that the upward slope is nowhere near stopping.

But why such a surge in land value now? As one farmer told Reuters:

“I’ve been in this business long enough, I remember working a night shift just to get by, to be able to buy Christmas gifts for the kids. These are good times.”

Good times, indeed.  It seems a large reason for the positive value trend is good harvests and good credit for farmers, says CNN Money.  It’s just a lot of good.

Reuters also says that China has a lot to do with it.  China and other developing countries are demanding more and more grain from our nation’s Midwest, and this boost in demand has brought in a wealth of profit.

Biofuels factor in as well.  As corn-based fuel is becoming more popular or more heavily researched, profit is coming from all directions.

Analysts have been calling “bubble,” but this has yet to appear.  So far, the good fortune is continuing.

As Loyd Brown of Hertz Farm Management told Reuters:

“Agriculture is cyclical, but typically when you have a bubble you have certain characteristics that are not in this market.”

But one thing to fear is competition.

Reuters reports that areas in South America and Africa could come forward soon with cheaper soil that is just as fertile as in the Midwest.

For now, however, the United States is doing just fine.  Nebraska saw the most positive trend in prices with a 40% increase in the past year.

Many family-owned farms are splitting up as prices continue to slope upward.  Reuters interviewed the Ellingson family, who sold the farm after their father’s death.

As investors and farmers are eager to take over the land that offers so much promise today, long-time farming families are leaving the business and taking advantage of the land price as they do it.

Farmland is becoming a safety zone in the U.S. economy.  But bubble or long-term trend? We’ll have to wait and see.

That’s all for now,


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