11-16 IAN Farmland Values Hold

 Farmers, is your farmland worth anything? I’m David Sparks and I’ll be right back to answer that. In a recent speech Sheila Bair, chairman of the Federal Deposit Insurance Corp., warned that U.S. farmland could be the next asset bubble at risk of bursting.

She said it’s important to monitor U.S. farmland values for signs of instability. Farmland values remain 58 percent above 2000 levels in inflation-adjusted terms and have remained strong during the recession. Many investors have turned to farmland because of the current agriculture boom.

The 1980’s were devastating on the farm when the price of land crashed. Many have wondered if current economic conditions might lead to a similar farm crisis. Farm management specialist Gary Schnitkey doesn’t think so. He says before a large farmland price decline would occur, farmland returns likely would have to decrease or interest rates would have to increase. Either could occur, but he says neither seems likely: “There was a lot of concern in 2004-5-6 that as we saw those price increases and we saw urban movement out from metropolitan areas buying up farmland and then that trickling out to all farmland, when that ended we would see a decline in farmland prices. Fortunately about the time when that boom in urban development ended, commodity prices increased and that caused cash rents to increase and farmland prices have been holding steady.”

That’s a great sign for the American farmer.  and those of us he hate the thought of urban