Farmland is becoming a hot commodity as prices boom



Farmland prices are growing rapidly across the Midwest region due to a combination of strong recent growth in grain markets and low interest rates.

Now, prices of agricultural land in the region are rising even faster than they were during the previous farmland boom around a decade ago, the Wall Street Journal reported.

Farmland prices in states such as Illinois, Indiana, Iowa, Michigan, and Wisconsin grew by an average of 6% during 2020 amid a jump in grain prices that helped to increase revenue for farmers. That’s the biggest gain since 2012, according to the Federal Reserve Banks. What’s more, prices are continuing to rise this year, with a recent survey of Iowa farmland specialists by the Iowa chapter of the Realtors Land Institute showing that average values are up 8% since September.

The Journal reported that farmers have been keen to cash in by selling parcels of land to investors. However, it could end up hurting smaller farmers. Large farming businesses dominate ownership of the U.S.’s 900 million plus acres of farmland. The Journal noted that 75% of farmland is controlled by just 13% of farmers. That has resulted in smaller farmers finding it more difficult to afford the down payment on parcels of land or compete for land leases.

The issue is compounded by the fact that supply of farmland remains low, resulting in hot competition for those parcels that are available. Farmers have to compete against large investors such as pensions and hedge funds that see farmland as a lucrative alternative to traditional stocks and bonds. Adding to the problem is that the amount of farmland in the U.S. has decreased by about 25%, or 305 million acres, since 1950, according to USDA data.

About Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at mike@realtybiznews.com.

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