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Jan. 19, 2015 Agrimoney.com reports: Farm rents in the U.S. will plunge by more than one-third, lenders believe, in a reflection of the falling crop prices which have extended into 2015 a fall in land values which began in late 2013. Bank chief executives in major U.S. agricultural states surveyed by Creighton University expected, on average, that cash rents this year will fall "significantly" to $214 per acre, from $254 per acre last year. The finding comes amid a weaker period for farm profits spurred by lower crop prices, with the US Department of Agriculture estimating that overall domestic net farm income last year fell 25% to $97.3bn. And it reflects a continued fall in prices of US farmland too, with Creighton estimating that values will fall in January for a 14th successive month. Take air out of the bubble "Cash rents are down $25-50 per acre in some cases," James Brown, chief executive of Hardin County Savings Bank in Eldora, Iowa, told the survey. "If commodity prices stay in this range there will be more significant decreases." As for values of land itself, the Creighton data indicated a reading of 39.4 this month for an index of price growth, up from December's 38.6, but remaining below the 50.0 which indicates a neutral market. "Much weaker crop prices continue to take air out of the bubble in agricultural land prices," said Ernie Goss, the Creighton economics professor in charge of the survey. Ethanol poll The survey also underlined the resilience of US ethanol production to the drop in energy prices, with only 14.4% of lenders saying that output had fallen in their area, compared with 71% who estimated there had been no change. Some 14% of bank chief executives reported an increase in local ethanol output, despite the weaker production margins implied by ethanol prices which have already tumbled by some 17% so far in 2015, compared with a 5% drop in prices of corn, the main raw material. "Lower corn and fuel prices have yet to impact ethanol producers according to bank CEOs," Creighton said. Official data on Wednesday showed a jumped of 29,000 barrels a day to 978,000 barrels a day in US ethanol production last week - data which, with inventories up 1.38m barrels at 20.23m barrels, sent prices of the biofuel to a nine-year low. Tweet |
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