MetLife Agricultural Finance Sees U.S. Farmland Values Declining

An update at AgriMoney Online Friday by Mike Verdin indicated that, “US farmland prices are heading for their ‘first significant correction since the mid-1980s,’ MetLife Agricultural Finance said, as official data showed that, on some measures, market conditions were already the worst since then.

“US land prices will fall by an average of 20% from their peak – typically set early last year – before the slump peters out in 2018, said MetLife, one of North America’s largest agricultural mortgage lenders, blamed the decline on weaker farm profits.

“While interest rates, one big determinant of farmland market fortunes, look likely to ‘remain low,’ cash receipts, that is income from produce sales, look set to remain depressed by the dent to prices from weak crops.”

The AgriMoney update noted that, “The comments came even as data from the Federal Reserve, the US central bank, showed prices in Midwest states including the so-called ‘I’ states of Illinois, Indiana and Iowa falling by 3% in the year to the July-to-September quarter.”

Friday’s update added that, “However, MetLife said that the market would not stage the kind of ‘crisis’ seen in the 1980s, when a sharp rise in interest rates fuelled a 42% collapse in US land prices, peak to trough.

“‘The crisis in the 1980s was a product of policies that incentivised the sector to take on excessive leverage and an abrupt change in monetary policy that caused interest rates to rise,’ the lender said.

“‘This is not the case today.'”

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