U.S. farmland prices have continued their spiral downwards for a 28th successive month owing to drought concerns.The US farmland price index has been recorded at 20.2 by researchers at Creighton University. This price index comes in much lower than the 29.8 that was reported last month, and worryingly below the 50.0 point which is indicative of a neutral market.
U.S. farmland prices continuing their fall
This decline has been ongoing since late 2013, and is reflective of the weakened agriculture sector that is currently undergoing debt restructuring from under-pressure farmers. This restructuring of debt among farmers has been the subject of a survey carried out by various bankers. Among these bankers, Jeremy Bonnet at Havana National Bank located in Illinois notes, “Obviously this practice is a Band-Aid until commodity prices get back in line”.
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Bonnet goes on to say, “Farmers will not be able to sustain in such a low price environment for too many more harvests.” This data, collected by the University of Nebraska-Lincoln, highlights a decline in farmland prices notably in Nebraska, falling by 17% to $1,945 per acre.”
The demand for food for cattle and other livestock producers, however, shows a less grim outlook for others, with the prices of Nebraska’s hayland soaring.
“Adequate precipitation since the drought helped the grazing land across Nebraska recover,” the University of Nebraska-Lincoln (UNL) reported.
“As hay prices dropped in late 2015 and early 2016, so has the willingness of producers to bid on hayland.”
It has been noted that farmers are less inclined to invest in irrigated cropland, with the average price of gravity-irrigated cropland declining by 6% to $6,505 per acre.
UNL notes, “The financial resources necessary for purchasing this land class compared to the irrigated land classes typically require lower debt service payments, and may be more appealing for those interested in purchasing land.”
Lowest Recorded Figures
The survey carried out by the University of Creighton also noted the weakest ever index reading for the sales in farm equipment, falling from 11.3 in February to 6.7 in March.
Ernie Goss, professor of economics at Creighton University said, “Weakness in farm income continues to constrain the sale of agriculture equipment across the region.
“Reductions in farm prices have negatively affected the agriculture equipment dealers and manufacturers.”
This comes at the same time that agricultural equipment giant, John Deere, have seen a drop in their stock price as the likelihood of a global recession increases.