The land value wave dips
From 2006 to 2013, significant increases in commodity prices, due to surging demand, signalled the need for more land to be converted to row crop production. The subsequent steep increases in agricultural land values have pulled enough acres into row crop production to oversupply most commodities, both domestically and globally.
The resulting effect has been to drive agri commodity price levels below breakeven. After two years of economic losses at the farm level—which resulted largely from the significant drop in commodity prices—the cost of renting land remains sticky and unsustainably high.
In 2017/18 and moving forward, rent values need to begin dropping in order to balance with lower commodity prices over the long term. Consequently, the valuation of land will also adjust lower. If rental costs remain sticky at unsustainable levels through the 2017/18 growing period, individual land assets face the threat of much deeper devaluation, as nutrient and crop protection programs are cut and abandonment (usage changes) increases.
