Will farmland be the next asset to dramatically fall in price? Cash corn prices in the Midwest are now down to $3.50 a bushel and soybeans are at $8.00. At these prices, it takes at or near 100 bushels of corn just to pay the cash rent on top quality Iowa farmland. This means renters are in a real financial wreck considering the high price of other production inputs. In Argentina where farmers are currently facing these new low prices at planting, we have seen farmers abandon cash farmland leases and pull back into their deeded acreage. So far, farmland prices there have not fallen there but leases are going begging. I suspect we could see the same thing happen in the Midwest this spring. Farmland has already seen one price prop, exurbanization, removed. A dramatic drop in cash rents would set farmland up for severe price declines in 2010 and 2011 as investors exit. Unfortunately, due to the current banking crisis the exit window for cashing in on the recent price runup may have already closed.
Please visit Alan Nation's blog for more news on agriculture and grass farming.
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