Industry At A Glance: Land values take a breatherIndustry At A Glance: Land values take a breather
The hot land market is cooling just a little.
August 10, 2015
The largest asset associated with any form of agriculture revolves around land. And land-value appreciation over time has been, and continues to be, an important source of growing the balance sheet for all types of operations. As such, USDA’s annual land value report is always an important benchmark for what’s going on across the country.
The recent USDA report clearly indicates the run-up in both cropland and pasture is beginning to take a breather. While both are at new all-time highs—$4,130 per acre and $1,330 per acre for cropland and pasture, respectively—the year-over-year gains are beginning to flatten out. Most notably, cropland gained only $30 per acre on a national average basis – that’s less than 1/10 of the previous four years, in which the gains averaged $350 per acre on an annual basis.
Meanwhile, pasture values also gained $30 per acre. However, proportionally-speaking, that $30 increase equates to around a 2.5% increase, versus cropland where the increase amounts to less than 1%. The difference is important and speaks to the ongoing shift in agriculture. Livestock receipts are becoming increasingly important again to the nation’s farm economy and land values are responding accordingly.
And following a long uptick in cropland values compared with pasture values, the ratio between the two has also begun to flatten out—hovering around 3:1 for the past several years. That said, how do you perceive the difference between cropland and pasture values in your area? Do you foresee land values, in general, beginning to slow down? Will availability be an issue in your area over the long run? That is, are there opportunities to grow your operation in the coming years through land acquisition?
Leave your thoughts in the comments section below.
Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.
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