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So is farmland going to have a bubble or not? The jury is still out.
Here is an expert from recent Wall Street Journal post :A Full Frontal View of the World's Uneven Monetary Policy that sums it up.
.... "Kansas City Fed President Thomas Hoenig-who has for some time now been the chief internal critic of central-bank policy-warned the U.S. Senate Thursday that "history has taught us that it is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble driven by financial markets and how much results from fundamental changes in demand-and-supply conditions."
Added Hoenig: "My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture-and the U.S. economy more generally-by surprise once again."
If agricultural land prices prove to be a bubble, it would show the U.S. economy's potential to surprise. But it would also be somewhat ironic if a bubble formed in mid-western farmland prices due to Fed policy and surging emerging-market demand inadequately tempered by local central banks. The jury thus far remains out.".....
While Hoening's distrust of the market for farmland has gained widespread press the issue that farmland debt ratios are low has not. It will be interesting to see how this all plays out because the tight credit markets are not really a factor for farmers that are expanding operations because they have plenty of cash on hand to make the purchases and many cash land transactions are not tracked anywhere as most are private treaty sales. As is typically the case that one auction sale that went sky high gets the press because the auction company issued a press release stating that now land prices are the new average based up on their sales history of a few auctions and not the entire picture across the state that includes MLS data, private sales and other company data. There is no central clearing house for land sold data in the United States nor even by state because most MLS and real estate boards overlook land or group it with either residential or commercial sales. Farmland is a difficult market to track and that leads to speculation which brings us back to the beginning statement.... the jury is out.
