A recent agricultural boom in the US has created the biggest surge in farmland prices in over three decades. Prices have been accelerating so rapidly that some are beginning to fear the start of an agricultural bubble â€“ a bubble which may soon burst.
According to a recent survey from the Federal Reserve Bank of Kansas City, ranchland values in the Plains have risen by 14 percent, while cropland values have increased by a 25 percent over the past year. In the state of Nebraska, irrigated and nonirrigated land values have shot up 40 percent from year-ago levels, giving the state the strongest gains in the country.
However, Leland Strom, CEO of the Farm Credit Administration was hesitant to refer to the present agricultural boom as a potential bubble. In a statement made to Reuters on Tuesday, he said: â€œI’m not ready to term it an asset bubble. I think we are in an era that warrants extreme caution by those in the industry, the farmers or investors who are purchasing land.â€
And in truth, it does seem a bit early to raise the alarm bells regarding an agricultural bubble. After all, it does make sense for the agricultural sector to show increasing values as demand for agricultural produce increases. The biofuels industry is booming, which means that corn is in high demand. Plus, with rising international demand from a growing Chinese middle class, it should come as no surprise that the U.S. agricultural sector is posting such huge increases.
What are your thoughts on the latest increases in US farmland values? Are we seeing the start of an agricultural boom?
Image CC licensed by fishhawk: Corn field