Feb. 24 (Bloomberg) -- U.S. farmland prices, already the highest ever, may increase further as low interest rates and surging agricultural income encourage farmers to invest in more land to expand output, a Purdue University economist said.
Sales of land used for crops and ranches are being driven mostly by demand from farmers, even as more financial investors get into the booming market, according to Brent Gloy, a professor at Purdue in West Lafayette, Indiana. Higher interest rates or lower agricultural prices would eventually constrain growth, he said.
“Prices will go down someday, but probably not anytime soon,” Gloy said today at a conference in Arlington, Virginia, sponsored by the U.S. Department of Agriculture.
The average value of farmland reached a record $2,350 an acre in 2011, the USDA said in August. Midwest prices measured by the Federal Reserve Bank of Chicago rose 22 percent last year, the biggest annual increase since 1976, while the Kansas City Fed said cropland in its region rose 25 percent and ranchland gained 14 percent, according to reports released earlier this month.
Farmland in Iowa, the biggest U.S. producer of corn and soybeans, surged 32 percent to a record average of $6,708 last year, according to an Iowa State University survey of real- estate transactions released in December. Gains in value during the past two years largely have been supported by fundamental growth in farm income, though bubbles may be forming in isolated areas, the USDA said in a report earlier this week.
--Editors: Steve Stroth, Thomas Galatola
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