Experts: Odds Are Skyrocketing Farmland Prices Will Continue, Here’s Why

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Source: AgWeb.com

13,400 per acre in Cedar County, Neb. $17,000 per acre in Douglas County, Ill. $26,000 per acre in Johnson County, Iowa.

This has delivered numerous mind-blowing farmland sales. But will this runup in values continue?
The odds are likely, according to a key ratio that compares farm debt to farm incomes, says Mike Walsten, contributing editor to LandOwner.

“The farm debt-to-income ratio suggests the land market is not so heavily leveraged that a downturn in profits will bring a rush of forced land sales that would crush land values in the short term,” he says. “I expect the land market will continue to see strong demand well into next year.”

The ratio reflects how much total net farm income, as forecast by USDA, is available to service total farm debt. A high ratio, such as $6 of debt to $1 of net income, means debt is too high and income too low. If a high ratio exists for three years or longer, it signals farmland foreclosures and lower land prices are on the horizon.

For 2021, the ratio eased back under 4. That’s based on USDA’s recent forecast of $113 billion in net farm income.

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