Kansas City Fed economists see little risk of sharp drop in farmland values in the near term

The value of farmland is an important underlying factor in the rural economy. The recession has "cut farm incomes and also cooled residential and recreational demand for farmland," reducing farmland values slightly, and while they have "held relatively steady" this year, increased volatility in agriculture markets and the prospect of higher interest rates makes some wonder, "Are today’s farmland values another bubble getting ready to burst?"

So write Jason Henderson, a vice president of the Federal Reserve Bank of Kansas City, and Assistant Economist Maria Akers in the latest edition of the bank's Main Street Economist. But after going through a detailed analysis of the data, as well as current and historical trends, they sees "little risk of a sharp collapse in farmland values in the near term" because "near-term projections suggest that returns to crop production may be strong enough to support recent cropland value gains." (Read more)