Cropland values hit record highs, but skyrocketing prices for equipment and other inflation boost production costs

Agriculture Department chart; click to enlarge it

The Farm Belt is in a revival, with cropland values hitting record highs this year, but farmers worry about inflation and supply-chain disruptions, Jesse Newman and Bob Tita report for The Wall Street Journal.

"A months-long rally in prices for major agricultural commodities such as corn and soybeans is pushing up incomes for U.S. farmers and unleashing spending and investment that had been subdued for years, according to agricultural economists and executives," the Journal reports. The run-up in land and equipment prices that has followed could leave farmers exposed if big harvests send crop prices lower again, some economists said. Until recently, U.S. farmers were in the grips of an agricultural recession brought on by a world-wide crop glut. Starting last year, however, strong demand from China and poor weather in key growing regions fueled a sharp rise in prices for crops like corn and soybeans, which touched their highest levels in eight years during the spring. U.S. agricultural exports are expected to hit records in fiscal 2021 and 2022, according to U.S. Department of Agriculture forecasts."

The department's most recent Farm Income Forecast projected that net farm income would increase 20% this year to its highest level since 2013. But "inflation is also hitting the Farm Belt, boosting almost all farmers’ production expenses this year, including fertilizer and fuel," Newman and Tita report. "The USDA expects production expenses to rise by more than 7% in 2021, the agency said. Farmers’ bills for supplies such as seed and fertilizer bought for next year will be the highest ever," an agricultural economist at major farm lender Wells Fargo said.