Aquila Sees Better Farmland Returns in U.S. Plains Than Midwest

Farmland prices in the U.S. Midwest corn belt could be a “bubble,” while growing areas in the Great Plains and Mississippi River Delta provide better returns, said Detlef Schoen, managing partner at Aquila Capital.

New seed varieties and warmer temperatures are allowing farmers to plant corn and soybeans in “peripheral” areas in North America, including regions further north and west of the Midwest, Hamburg-based Schoen said today in an interview at an agriculture conference in London. The U.S. Department of Agriculture estimates that domestic producers will harvest a record 14.79 billion bushels of corn this year.

“The corn belt and soybean belt are moving north at incredible speeds, moving into the Great Plains, into Nebraska, Montana and the Dakotas,” said Schoen, who helps manage about 5 billion euros ($6.24 billion) in assets for Aquila, including about 200 million euros related to agriculture. “In five years I think you’ll have more soybeans in that country, where today you just have sunflowers and wheat, so that will lift your returns per acre enormously.”

Farmers in a five-state region of the Midwest saw a 19 percent increase in land prices as of April 1 from a year earlier, the Chicago Federal Reserve bank said in a report last month. Prices jumped 27 percent in Iowa, the biggest corn and soybean producer. Great Plains states posted a 25 percent increase in farmland prices, according to the Kansas City Fed.

“The corn belt is a bubble, but you can go to the Great Plains, you can go to the Mississippi Delta and you can find some fantastic opportunities,” Schoen said.

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