Shiller Singles Out Farmland as Bubble Candidate: Chart of the Day
U.S. farmland may turn into “the next big speculative bubble” as prices climb, according to Robert J. Shiller, a Yale University economics professor.
The CHART OF THE DAY shows that the value of agricultural land in the upper Midwest has doubled since 2002, according to data compiled by the Federal Reserve Bank of Chicago. The chart also depicts farm values in inflation-adjusted terms, which are approaching their highs from the 1970s. The region encompasses Illinois, Indiana, Iowa, Michigan and Wisconsin.
Shiller, whose book “Irrational Exuberance” foreshadowed the end of the 1990s surge in stocks, wrote yesterday that farms are “my favorite dark-horse bubble candidate for the next decade or so.” His commentary ran on the Project Syndicate website.
“Farmland, as least in certain places, seems to have the most contagious ‘new era’ story right now,” Shiller wrote. He cited the risk of food shortages related to global warming as contributing to a boom in the U.K., along with the U.S.
Land values rose 12 percent last year in the Chicago Fed’s region, and there are signs that the increases are accelerating. Iowa’s average cropland value rose 20 percent for the six months ended in March, according to a survey released yesterday by the Iowa Farm & Land Chapter No. 2 of the Realtors Land Institute.
Even so, Shiller wrote that forecasting any kind of bubble is difficult at best. “Bubbles are social epidemics, fostered by a sort of interpersonal contagion,” he wrote.
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To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net
To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net
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