Could farmland values fall 10% in 2014?

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Bubble Farmland values may be at a “tipping point” — thanks in part to rising flattening commodity prices, according to one agricultural economist

“We’re at a point where land values are going to quit rising so rapidly,” Terry Kastens, agricultural economist emeritus at Kansas State University, told Bloomberg.

Farmland across the nation has been steadily recovering from last year’s drought, and the USDA’s November “World Agricultural Supply and Demand Estimates” report showed corn harvest at a record 14 billion bushels, up  30 percent from 2012.  See, “U.S. on track for record corn production.”

Kastens suggests prices will “probably flatten out and may even fall back 10 percent or so, but we’re not going to see some crash.”

Read more from Bloomberg here.

Is the U.S. farm sector ready to “sober up” from the farmland boom that has lasted for more than six years?

The answer seems to be “yes,” according to Reuters.

The American Bankers ag meeting in late-November warned farmers to brace for change in the coming year. Grain farmers will see their income shrink even as costs to produce crops stay high. Farm land rents and seed costs are among the biggest costs that may resist declines in the face of falling crop revenues, but fertilizer also remains pricey, they said.

"The year 2014 will be the sobering up period," said Michael Swanson, an economist and senior vice president with Wells Fargo, the largest private lender to U.S. agriculture.

"Four-dollar corn would be bust for the high-cost producers and a burden for the low-cost producers," he said. "We will see a lot of stress with $4 corn, which will transform the market.

David Kohl, professor emeritus of agricultural economics at Virginia Tech, noted: "You have a group that is very efficient and doing well, but we're starting to see stress in that lower affluent economic producer.

"It's going to be interesting to see this play out this fall and winter."

Time will tell if there will be a hard – or soft – landing after the boom. So far, most forecasts indicate a soft landing with limited distressed sales of assets due to over-leveraged balance sheets.  

Read, “U.S. farm sector bracing to 'sober up' from boom in 2014.”

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