Source: Farmers National Co. news release
Between the time this article is written and the point in time when you read it, the uncertainties challenging the world will change. Most markets do not like uncertainty and that is exactly what we have right now. The outcome of the coronavirus is the biggest overall unknown that is affecting individuals and the world economy.
Specifically, in agriculture, trade issues and when U.S. producers will see the benefits of higher commodity demand, are questions not fully answered today. Add in whether there will or won’t be a 2020 MFP payment along with the normal growing season weather, and you begin to understand the scope of the shorter-term uncertainties being faced by agriculture.
If most markets don’t like uncertainties, why is the agricultural land market steady to stronger? First and foremost, the land is a long-term asset that vastly extends the investment horizon. Interest rates have an important effect on land prices as low rates support the capitalization rates we are experiencing in ag land. With the Federal Reserve willing to lower FED rates and the Ten-Year U.S. Treasury hovering under 1.0%, lower interest rates are lending support to land values.
At Farmers National, we are seeing a small increase in land buying interest from individual investors. With the stock market gyrating and low CD rates, investors are more willing to look for alternatives to invest in, including farmland. Also, investment funds, for the most part, are remaining active in the land market.
Farmers continue to be interested in buying land as there is a bit of optimism among producers for a better year than the last. In summary, there is more than adequate demand for good cropland while the supply for sale remains on the lower side.
At many of the Farmers National auctions this winter, our agents have seen stronger than expected prices being paid for cropland. Despite the short-term uncertainties swirling around agriculture, land is seen as the solid long-term asset that both farmers and investors are interested in owning. Risk management and safety reign in uncertain times.