Surging Grain Prices Are Driving Up Farmland Prices
April 9, 2021
The American Farm Belt is in the midst of a resurgence. Dry weather and strong export demand from China have driven the prices of wheat, corn, and soybeans to their highest level in more than six years. This, according to reporting from the Wall Street Journal, has led to fierce bidding wars and expensive leasing rights, which may result in higher prices for consumers.
Farmland values surged in the decade leading up to 2014, with the WSJ noting that land values more than tripled in states like Iowa and Nebraska. By 2020, land values had cratered, falling more by 15% amidst falling crop prices that drove many farmers out of business.
Increasing grain prices in 2020, however, has caused the value of this land to spike. The Chicago Federal Reserve, which covers agricultural areas like Indiana and Iowa, saw land prices climb by 6% in 2020, the highest yearly increase since 2012. The trend is expected to continue this year.
Farmers are competing for land not only with each other but with investors. The WSJ notes that hedge funds and pension plans have scooped up farmland. This means that many smaller, independent farmers are leasing the land they work, and that currying favor with landlords has become an important part of their job.