Agricultural economists and weathermen have the same challenge in their careers – they are expected to make predictions as part of their job, but realize that if they aren’t correct then some people will be really upset. Recently, the Food and Agriculture Policy Research Institute at the University of Missouri provided their estimates for commodity production trends through 2015 (Baseline Update for Agricultural Markets). This type of information can be critically important to everyone from the smallest farmer to the largest agricultural company, not to mention a multitude of government groups. Why so important? Many organizations (both private and public) create business plans and budgets that reach out at least 5 – 10 years into the future, and they are betting and committing billions of dollars in investments on the accuracy of an economic forecast.
Even though this report does not specifically address farmland value trends, the information contained within each commodity area might give us some hints. Specific to the Midwest, corn prices are expected to average just under $4 per bushel while soybean prices are just under $10. Yields are expected to rise each year as new seed technology is integrated into the marketplace. Of course, all of this is still subject to what the weatherman might say. Regardless, I think these predicted price levels and yields can help sustain the current level of land prices. In the absence of $6.00 corn, or $2.50 corn, I don’t anticipate a huge movement in farmland values either direction. This relative stability is what makes farmland such an attractive investment.
