This is a constant evolving question to allow a firm prediction. There are specific recent direct history factors that have affected farm land values to increase over last several years. What are these factors?
- Increase in Milk prices
- Increase in Grain prices
- Increase in local forage demand that has also increased forage prices
- Decrease in interest rates
Because of a good 2014 crop year, the decrease in demand has decreased the prices for both grain and forage crops. But, will milk prices stay high? This is the unknown. Milk Futures are showing a reduction in milk price. Our country’s milk exports to developing countries, the increasing strength of the US Dollar and other factors has also decreased the demand of US exports that can affect the milk price. We do not have any control over the other countries’ demand for our milk, therefore a change and the duration of a change will play a major factor in national milk prices.
Other considerations that can also have an indirect affect on land values and rental prices include:
- Land Sales. If the flow of local farmer’s incomes from land rent or crop production are reduced, the chances increase that the value of the land income to cover land expenses (taxes, insurance, etc.) will be reduced. More people will put their farm land on the market and possibly drive land prices lower with the law of supply and demand.
- Interest Rates. The Federal Reserve adjusts the Prime Rate periodically. We see these rates staying steady for the time being as long as all economic factors stay the same.
So will land values increase for 2015? The answer will be decided on all of these outside variable forces. We anticipate the land values to stay similar to 2014 with all factors as we see today. Each decision made on real estate purchasing and selling, selling crops , land rental, etc. should be made on each landowner’s specific situation. Many specific properties also have factors that will affect the financial status on how to proceed what is best for that landowner financially, like cash flow, outstanding loans, etc. The final result should be: What is right for your financial situation? For more information, contact AbbyBank.