U.S. Farmland Prices May Fall in 2014, Economist Says

U.S. farmland values at a “tipping point” may fall as much as 10 percent in 2014 as commodity prices ease, according to Terry Kastens, agricultural economist emeritus at Kansas State University.

Rising global crop output and stable renewable-fuel standards are “leading to a flattening in commodity prices,” Kastens, based in Atwood, Kansas, said in a telephone interview.

Farmland in the U.S., the world’s biggest corn grower, is recovering from last year’s drought, the most-severe since the 1930s. Production of the grain will surge to a record 13.989 billion bushels this year, the government said on Nov. 8.

“We’re at a point where land values are going to quit rising so rapidly,” said Kastens, whose family farm has about 20,000 acres of wheat, corn and yellow peas in northwest Kansas. Prices will “probably flatten out and may even fall back 10 percent or so, but we’re not going to see some crash.”

Rents in some area also may ease next year, Kastens said. In states including Iowa, the biggest corn and soybean grower, and Illinois, there may be some “big drops” if rents are negotiated every year based on forecasts for crop prices, he said.

In riskier growing regions including the High Plains, rents may rise in 2014 because gains during previous crop rallies were moderate, he said.

Through yesterday, corn futures in Chicago slumped 48 percent to $4.38 a bushel from a record $8.49 in August 2012. This year, the soybean crop will rise to 3.258 billion bushels, the third-biggest ever, the government said on Nov. 8. The price of the oilseed dropped 25 percent to $13.4375 a bushel from the all-time high of $17.89 in September 2012.

Ample Cash

Land sales by farmers have climbed because producers with ample cash still are buying, while demand by investors eased amid concern that the market may have peaked, he said.

U.S. farmland prices may jump if commodity prices surge, sending corn back to $7, Kastens said. There may be higher rents and higher property values in two to 10 years if crop output has “massive consolidation,” and large companies are able to pay higher prices, he said.

Kastens spoke before a presentation today at the DTN/The Progressive Farmer Ag Summit in Chicago. Corn is the biggest U.S. crop, followed by soybeans.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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