For many, ownership of land is their livelihood, retirement, legacy, inheritance, and/or way of life. The fluctuation of land values personally affects everyone. Important decisions may need to be made. The discussion surrounding values should be straightforward and honest. Let’s not sugarcoat it. The land market has softened. We created this graph to show the correlation between commodity prices, land values and interest rates since 2000. You’ll see that starting in 2010, we experienced what could be a once-in-a-lifetime perfect storm resulting in historic income and growth within the Agricultural community.
Drought and a weak dollar created exports, strong demand, thus a lower supply and higher prices for what we produced. Both the commodity and livestock sectors of agriculture enjoyed unprecedented income. This income combined with low interest rates and limited supply of land for sale, fueled the historic increases in land values. As with everything, what goes up eventually comes down. Now the dollar is strong with fewer exports. We are experiencing record production, thus creating bulging supplies. This, combined with weakening demand, has led to commodity and livestock prices being half of what they were several years ago. Where do we go from here? No one knows. Two major factors will determine if and when prices will increase – major weather events reducing supplies and/or a weakening dollar to encourage exports and strengthen demand.
Since commodity prices, input costs, and interest rates drive the value of land, consider reading “5 Factors Influencing Land Values” in the Newsletter below for valuable insights about buying and selling land in a down economy.