Corn Belt farmland prices fall again, despite crop price firmness


The spring-time rally in crop prices has not been echoed in buoyancy in land prices, with Corn Belt values landing investors a fourth successive quarter of losses, even factoring in income such as rents.

Total returns on Corn Belt land – including both land price appreciation and rents – proved notably better in the April-to-June period than in the previous quarter, when they came in at a negative 3.3%, data from the National Council of Real Estate Investment Fiduciaries showed.

However, at a negative 0.03%, "on continued depreciation", they remained in the red for a fourth quarter, a period over which investors have seen a total negative return of 6.5%.

The continued weakness came despite a rally during the April-to-June period in prices of corn and soybeans, which the Corn Belt is particularly noted for producing, amid concerns over weather setbacks.

Prices down 6%

And land prices have fallen further since the end of June, according to a separate survey by Creighton University of values in major Midwest agricultural states, including Corn Belt majors such as Illinois and Iowa.

A farmland price index compiled by Creighton came in at 31.3 for July, down 1.0 points month on month, and well below the 50.0 level which indicates a neutral market.

"This is the 32nd straight month the index has languished below growth neutral 50.0," the university said.

In terms of actual prices, bankers surveyed by Creighton believe US farmland values are now down by 6% over the past 12 months.

Orchards vs corn fields

However, the Creighton data did offer some sign of some improvement this month in market conditions outside major crop-growing states, with values in Wyoming, for instance, better known for livestock output, at least declining at a slower pace.

And the Ncreif data showed land outside the Corn Belt offering positive total returns, particularly in areas with large areas of farmland put down to permanent crops, such as almonds, apples and stone fruits, rather than to annual crops, such as corn.

Indeed, while values of annual US cropland declined by an average of 0.8% over the quarter, a decline matched by rental income, "permanent cropland improved versus last quarter with a 1.8% total return", the Chicago-based institute said

This comprised appreciation of 1.5% and 0.3% in income.

'Modest returns'

"Over the past year, permanent cropland remains the stronger performer with a 14.7% total return, compared to 5.6% for annual cropland," Ncreif said, adding that the extent of the disparity was unusual on its data, which go back to 1990.

"Historically, total returns for these two categories are much closer with the since-inception [full-year] return for permanent cropland being 12.5% versus 10.8% for annual cropland."

The Ncreif data, which are drawn from 700 farms worth a combined $7.5bn, showed US farmland returns overall averaging a positive 1.3% in the April-to-June period, with the figure split almost evenly between appreciated and income.

"Quarterly total returns have been modest in 2016, trailing their 20‐year average of 3.1% by a wide margin,"Ncreif said.

The institute noted that agricultural income is "under pressure from a strong dollar and appreciation slowing on farmland valuations 49% above their recessionary trough in fourth quarter 2009".


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