Drought Fueling Surge In Farmland Prices

September 18, 2012 

On top of a doubling over the last five years, plains states farmland prices have risen 26% in the quarter ending June 30. Current drought conditions are slowing the market down somewhat, though not necessarily for commercial real estate in San Diego; but what’s the long-term picture for agriculture?

A report of survey published this week by the Kansas City Federal Reserve Bank noted that farmland values across its region rose less than 3% versus the prior quarter, half the rate seen earlier this year.

More than 75% of the survey’s respondents expected farmland values to stay roughly flat for the rest of the growing season, which ends in early fall. 

RLI President Ray Brownfield of the John Green land company spoke on This Week In Agribusiness on land values and cash rates: Right now land values, such as for commercial real estate in San Diego, are strong with buyers, and if the drought stays as a one-year effect, the long term putlook is good. Ray also mentions seeing 1031 transactions bringing nonfarm interest – new investors for smaller tracts. Want to get started and understand th einevenstment in agriculture. 

In the KC Fed report, Nebraska reported the biggest gains, land values for nonirrigated land climbing 37% from a 2011 and irrigated land gaining 35%. Missouri, especially hard-hit by the drought and has little irrigation, saw the value of its farmland climb only 18.6%. 

Ian Berry reports:

 Much of the Fed district has a relatively dry climate conducive to wheat farms and ranches, although irrigation and improved seed technology has in recent years boosted the amount suitable for corn. 

Ranchland values have continued to lag behind land used for crops, as the higher feed costs and lack of pastureland due to the drought has hurt ranchers’ margins. The Fed reported ranchland values in the district, which also includes Colorado and Wyoming, were up 16.2% versus a year ago. 

SOURCE: Wayne Grohl, The Source – Commercial Source 

DISCLAIMER: This blog has been curated from an alternate source and is designed for informational purposes to highlight the commercial real estate market. It solely represents the opinion of the specific blogger and does not necessarily represent the opinion of Pacific Coast Commercial.