A survey of 246 farmland owners shows that 65% of those participating felt someone else would pay more for their farm than they feel it is worth, according to an article from FarmDocDaily.com. The survey was conducted by the Purdue University Center for Commercial Agriculture for the upcoming Top Farmer Crop Workshop, being held July 9-11 in West Lafayette, Ind.
The results of the survey will be presented in detail at the conference, but in a recent preview, Purdue reported that 65% of the farmland owners felt that somebody else would pay more for the farm than they felt it was worth.
The survey found a wide range of perceptions, with nearly half of the respondents indicating “they felt the farmland market was currently in a bubble,” according to FarmDocDaily. However, those who own more land were less likely to see farmland as overvalued at current prices.
One factor complicating any attempt to get a handle on how high farmland prices will go is the lack of supply. Purdue’s Brent Gloy, who did the study for Purdue, said that “until the supply of land offered to the market increases, it is likely that those t the upper end of the demand curve will continue to to push prices higher.”
The reluctance of farmland owners to sell has puzzled people throughout the industry, because it runs counter to normal economic behavior. As a rule, rising prices usually result in more supply, but we haven’t seen that happening. The most common explanation — and the one that may well explain things most accurately — is that there are simply no other assets that offer stable returns in the 3-4% range (even though, as I’ve noted, returns based on cash rents have been dropping because land prices have been rising faster than rents).