What Does Trade Have to do With the Price of Land?07/19/2018
Anyone paying attention to the news over the past few months knows that the United States is in the midst of trade issues with multiple foreign countries. Agriculture, from the producer to the exporter to the end user, is especially tuned in to what is transpiring. Depending on the commodity, the importance to each segment in the supply chain is being felt in price expectations for the raw product to the finished good. Grains, meats, nuts, wine, and other ag products are being affected by the current trade situation. No one knows when and how the issues will be resolved.
The question being asked today by various segments of agriculture, is “What effect are trade issues having on land prices?” There is not an easy answer as there are many factors that influence local land values. Supply of land for sale and the level of demand are key factors influencing land prices along with the income generated by the land and interest rates.
Today’s lower commodity prices are based on projections of future yields, production, and demand which includes exports. World over there is still a fairly consistent total demand for ag products which bodes well for supporting commodity prices. But the expectation is that normal trade channels and efficiencies are being disrupted, which puts some concern into pricing.
Land is a long-term investment and its true value is an expression of future revenue streams. While the current low commodity prices are making some land buyers more cautious in their purchasing decisions, buying land for most people is for the long haul and it is more important what they think farm incomes will be over the coming years.
Add in inflation expectations and changing interest rates, and other factors besides just today’s commodity prices, and you get multiple influences in the land market as it discovers the price of a specific tract of land. Uncertainty of future events causes today’s caution, but stay tuned to see what plays out over the next few months in agriculture and the land market for the answer.
Source: Farmers National Co