Midwest Farmland Bubble May Be Growing

Nebraska News

Reuters - Sales of everything from compact tractors to combines have jumped at Jim Lichtenberg’s Nebraska store this year as farmers try to make the most of a boom in corn and soybean prices. “Yields were good this year and crop prices are real good right now, so guys have been spending some money,” said Mr. Lichtenberg, who has worked as a salesman for Johnson Farm Equipment in Fremont for 10 years. He estimates sales have risen by as much as 40 per cent this year.

Surging grain prices and growing investor interest are lifting farmland prices in the Midwest, and bank regulators fear that another U.S. bubble may be inflating.

Farmland prices are 58 per cent above their 2000 levels in inflation-adjusted terms, according to the Federal Deposit Insurance Corp. That’s about how much residential real estate prices rose in the United States from 2000 through 2004.

Those soaring land values reflect the largely unsung prosperity of U.S. states that shrugged off the downturn.

That’s good news, but many analysts wonder what would happen to the lenders who finance farmland operations and purchases if prices fall......Read the full article here

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