After jumping up in value over the past few years, farmland in many of the Plains states has slowed down in its appreciation.
A bumper crop, cheap prices for grain, and the lowest predicted farm income in five years have all taken a swipe at the value of farmland. Overall, states in the region, including Nebraska, Kansas, Missouri and Colorado, have farmland value hovering about 1 to 2 percent above its worth this time last year.
Ray Massey is a professor of agricultural economics at the University of Missouri.
“Deflating prices are always difficult for any sector of the economy,” he said. “So if land prices come down, the ability of a farmer to borrow money just for his operating expenses is decreased. There’s more scrutiny put on the banks to make sure they don’t have bad loans.”
Ultimately, Massey says there will likely be downward pressure on land prices for the next two years, as farmers are projected to have negative returns from their businesses.
“We will not have farmers with cash in their pockets to put large down payments on land and we will see bankers scrutinizing balance sheets of farmers more before they lend them money,” he said.
In a worst case scenario, Massey said we could see foreclosures of land. But right now, much of the agriculture community is proceeding with caution so as not to devolve into a land bubble situation reminiscent of the 1970s and 1980s.