Us farmland prices: has the bubble burst?

A survey by Creighton University (spotted by Business Insider) found that farmland values in the US have hit their lowest level since January 2010. Indeed, the farmland price index recorded its tenth decline in 11 months, with October’s index falling from September’s 54 to 50.9 out of 100.

The data follows comments from economic expert Robert Shiller, who cautioned that a farmland bubble might be on its way eventually in 2011.

This year, though, he has postponed his bubble prediction, noting that people were not talking about it, even though in the Midwest, prices jumped over 20 per cent last year:

“It doesn't have all the hallmarks of a bubble,” he told CNBC (transcript via Business Insider). “One of them is most people have never heard of it. In my view of a bubble it's something that gets people excited. Well, some people are excited. But most people don't even know about it."

“There are things driving rents up,” he added. “Notably biofuels are becoming more important and not just biofuels but plastics and other things that are made out of soybeans and corn.”

He also cited the world foot shortage as a fundamental that “might well drive farmland up”.

 “Weaker agriculture commodity prices and poor weather conditions in some parts of the region lowered the farmland price index. Clearly, farmland price growth and cash rent expansions in the months ahead will not be as healthy as has been experienced in the past couple of years,” commented Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.

“Even so,” he added, “we are still seeing some record prices for cropland in the region.”