Farmland Index Rebounds from All-Time Low

Source: Farmland Forecast

Rural bankers see a continued improvement in farmland values, after the farmland price index fell to its lowest level ever in October. The rural economy remained neutral with crop prices on the rise, but oil prices taking a plunge. The majority of bankers surveyed believe producers will cut back on equipment purchases in lieu of decreases in expected farm income.

The Rural Mainstreet Index (RMI), an index which ranges from 0 to 100 with 50.0 representing growth neutral, was unchanged from November, remaining at 50.0. Ernie Goss, Ph.D, Economics Professor at Creighton University stated, “Lower energy and grain prices continue to restrain growth in the rural economy.”

Source: Rural Mainstreet Index Creighton University

The farmland price index improved to 38.6 from 30.0 in November. The increase moves the index to just below levels reported in August. “Much weaker crop prices continue to take the air out of the bubble in agricultural land prices. This is the 13th straight month that the index has moved below growth neutral,” said Goss. Auction and private sales activity has increased as farmers have completed the 2014 harvest. Sale prices have “comeback to earth” relative to the irrational prices some pieces were fetching earlier this year, but good farmland is still selling for $10,000 or more per acre in some areas.

Source: Rural Mainstreet Index Creighton University

The farm equipment sales index increased to 23.7 from 18.6 in November. Continuing to rebound from an all-time survey low, farm equipment sales have been the area most affected by the fall in expected farmer income.

This month bankers were asked how they expected farmers to adjust their expenses to the likelihood of lower revenues. 63.6% of the respondents believe that farmers will cut back on equipment purchases. The next most common answer was cutting cash rents, which is surprising because most if not all of the rent conversation between landlords and farmers have been completed. Other common answers included waiting to see better seed deals and purchasing less fertilizer and chemicals.

Source: Rural Mainstreet Index Creighton University

Survey

This survey represents an early snapshot of the economy of rural, agricultural and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

- Colvin