Since 2000, U.S. farmland values have roughly doubled in nominal terms and have risen a whopping 58% after factoring in inflation, according to the Federal Deposit Insurance Corporation (FDIC), which recently hosted a symposium, “Don’t Bet the Farm — Assessing the Boom in U.S. Farmland Prices.”
A favored asset class in an era of high commodity prices, low interest rates, and ample liquidity, the agency says, farmland is attracting increased interest on the part of U.S. farmers and investors, as well as international investors. This has pushed farmland prices to all-time highs.
Does this pose a danger of farmland becoming another asset bubble similar to the one that brought the residential real estate market crashing down, or dot-com equities before that?
Or does it simply represent a reordering of relative asset prices that reflects long-term changes in global economic fundamentals? Private sector risk management and governmental financial stability policy both require answers to these questions, says Sheila Bair, FDIC chairman.
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