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Experts disagree on farmland trends
The market for farmland remains red-hot, but experts disagree on if and when there will be a correction—and if so, how big that correction might be.
Iowa State University economist Michael Duffy recently told the New York Times that if the price of corn falls to $4.50, farmland values could collapse by as much as 25 percent. Others have predicted a more gradual retrenchment of 30 percent or more over the next few years.
But auctioneer Jason Smith of Mondamin, Iowa, who sells farmland all across Iowa, doesn’t see farmland values dropping back anytime soon.
“As long as interest rates are low, we’re probably going to see this trend northward in prices,” Smith says. “If we get to the point where we start to raise the interest rates—and farming becomes any more expensive than it is today—then I think we’ll start to see them level off.
“I don’t really see a drop coming.”
Bob Schmidt, a senior vice president with Farm Credit Services of America based in Pierre, South Dakota, agrees.
“There’s been a lot of talk about the real estate bubble—but right now we don’t see that occurring,” Schmidt says. “We see a very strong market. It’s supported by a lot of cash in the marketplace. I assume we will continue to see that as we see the profitability that has occurred over the last two or three years—and what we anticipate for 2013.”
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