Low interest rates help keep farmland values stable
An extension ag business management instructor is confident farmland will hold its value as long as interest rates remain low.
David Bau with the University of Minnesota says his latest survey of 14 counties in southwest Minnesota shows prices only softened an average of $13 an acre.
He attributes that relative strength to continued high cash rents and cheap interest rates.
“That helps the borrower if you want to borrow some money for land. It also gives a better opportunity towards investing in land than investing in CD’s at the bank because the interest rates are so poor that the investors might think land is a better investment than saving at the bank.”
Bau tells Brownfield volatility in the stock market is another factor.
“Like going on a fair ride, we go up and down a roller coaster as markets go up and down. And the return right now for the year has been negative, so that again makes land (more attractive) maybe for investors to get off the roller coaster ride of the stock market.”
Recent surveys indicate farmland values remain resilient across the Midwest. The Chicago Fed reports a one percent increase in the first quarter of 2020 for the district that covers parts of Illinois, Indiana, Iowa, Michigan and Wisconsin.