Farmland prices are receiving non-farmer interest strictly as an investment play.
Even if ethanol demand subsides, or an alternative source for the renewable fuel, such as woody biomass or cellulose waste, replaces corn, farmland price appreciation could endure. As the nation's population increases (the U.S. Census Bureau has said it could hit 400 million or more by 2040), so will demand for food, energy, and space.When articles like this show up in popular business information sources alongside bonds and hedge funds, it means something. And it's not just here in the US.
McAllister still believes farmland is a good value right now. "I think land is a good investment, period," he says. "Maybe this [runup] is just a correction to an inefficient market. There has not been an adequate amount of credit given to the contributions made by Midwest agriculture in the past." [More]
Supply and demand are the drivers in the rush to buy broad acres; the basic facts are that during 2006 the average price of arable farm land in Scotland increased by no less than 30.7 per cent. Even fairly moderate acres halfway up the hill have risen in value by 16.3 per cent. What happens next remains open to question, but Dudgeon reckons the omens are on the positive side of neutral.It appears to unlike the inflation-fired Seventies, rapid and massive investment in land could prove to be the key to having a working farm twenty years from now.
He said: "The price of land is not being driven by rising incomes, but one just gets the feeling that there is a shade more optimism out there. [More]
It will require immense risk and premier management, but my feeling is we are creating the few thousand farms of the next generation today by forcing larger investments in land than most farmers will pay.