Source: University of Illinois

Unlike many other assets, farmland prices have not fallen during the recent troubled economic times. This has led to questions on whether farmland prices will have large price declines similar to those experienced by many stocks during 2009 or by farmland during the 1980s.

According to the newest data from the University of Illinois Department of Agricultural and Consumer Economics, land price declines are not likely in the near future. Before a large farmland price decline will occur, farmland returns likely will have to decrease or interest rates will have to increase. Either could occur, but neither seems likely in the near future. Over the next year, farmland returns are likely to increase because of above average commodity prices. Interest rates increases do not appear likely within the next year or two as the Federal Reserve seems intent on implementing more quantitative easing. In the longer-run, however, interest rate increases could occur, leading to declining farmland prices.

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