Thanks to Rising Grain Prices, US Farm Belt Experiences Boom for the First Time in 10 Years

[Asia Economy Reporter Byunghee Park] Thanks to the rise in prices of grains such as corn and soybeans, the U.S. Midwest agricultural region known as the "Farm Belt" is experiencing a boom for the first time in about 10 years, the Wall Street Journal (WSJ) reported on the 28th (local time).

Farmland prices in the Chicago Federal Reserve district rose about 6% last year, marking the highest increase since 2012. The Chicago Federal Reserve oversees Illinois, Iowa, Indiana, Michigan, and Wisconsin. In Iowa, farmland prices increased about 8% since last September.

The reason farmland prices have risen is due to increased demand for farmland purchases as grain prices have gone up.

The Food and Agriculture Organization (FAO) of the United Nations released the February global food price index on the 27th, which rose 2.4% from January to 116.0. This marks the ninth consecutive month of increase and the highest level since July 2014. Corn and soybean futures prices on the New York Commodity Exchange (COMEX) have risen about 60% over the past year.

FAO Food Price Index Trends [Image source= FAO website]

At the same time, low interest rates have made it easier to borrow funds, and government stimulus measures in response to COVID-19 have provided people with extra capital, leading to increased interest in farmland.

As a result, analysts say a boom has returned to the Farm Belt region for the first time in about 10 years. U.S. farmland prices showed an upward trend for about 10 years from the mid-2000s to 2014. During that period, farmland prices in Iowa and Nebraska more than tripled over 10 years. However, the market cooled afterward, and farmland prices in Iowa and Nebraska fell about 15% until last year.

Experts expect the upward trend in farmland prices to continue this year as well, as competition for farmland purchases remains fierce despite the price increases. The fact that U.S. farmland continues to decrease is also a factor driving farmland price increases. According to U.S. Department of Agriculture statistics, since 1950, U.S. farmland has decreased by 25%, about 305 million acres (approximately 12,342 million square meters).

On the other hand, the number of large landowners managing big farms has increased. According to the USDA, 13% of all farmers own 75% of the total farmland.

As a result, tenant farmers who rent land to farm are anxious about possibly losing their farmland. The cost of renting land is also rising.

A young farmer named Jordan Goblish told the WSJ in an interview that he had to reduce the amount of land he farms by half because he could not afford the rent. He said nearby farmland is rented for more than $300 per acre, which is $100 more per acre than his current rent, making it an unaffordable amount.

The increase in farmland prices raises concerns that small-scale farmers will face greater difficulties and that farmland concentration will intensify.

This content was produced with the assistance of AI translation services.