Economists: Land prices, rents stay up for variety of reasons
May 25, 2017
Although commodity prices have fallen, farmland prices and rents have not declined much for a variety of reasons, two economists told the Senate Agriculture Committee today.
When Sen. Charles Grassley, R-Iowa, asked if farm land values have stayed high because outside investors are buying land, USDA Chief Economist Robert Johansson said that values have held steady first because about 50 percent of farm land is rented and land rental contracts are multiyear and therefore not subject to immediate renegotiation.
Farm and ranch land rents are "sticky," Johansson said.
There is some "institutional investment" in land, Johansson added, but not much farm land comes on the market, and when it does there are producers who want to buy it.
Nathan Kauffman of the Omaha branch of the Kansas City Federal Reserve Bank added that it is important "to recognize the scale of wealth generated" when commodity prices were high and that farmers and ranchers have "limited alternative investments." Little land has come on the market, he noted, because there have been very few "forced liquidations."
Sen. Heidi Heitkamp, D-N.D., said it would be helpful to lawmakers to know how much farmland is owned by operators and that she believes in North Dakota it is only 25 percent. Local owners realize that farm land rents should "fluctuate" with commodity prices, but if the owners live far away they may have the attitude of a New York apartment owner who would not expect rents to go down at any time.