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What are the risks for farmland value?

Alan Barkema (January, 2014)

Summary

One of the most striking developments in the farm economy in the past decade is a surge in farmland value. Farmland earnings and the level of interest rates, which describes investment returns available in other parts of the economy, are key factors determining farmland value. In today’s economy, interest rates in national financial markets and the rent-to-value ratio in the Iowa farmland market are unusually low. Prospects for an eventual return of these key factors to historic norms are at the root of downside risk for Iowa’s farmland value.