Rabobank Expects Rental Prices to Fall and Land Values to Follow

Report explores possibility of decline in land values even if rental prices stick

St. Louis, Mo. (August 15, 2016) – A new report from the Rabobank Food & Agribusiness Research and Advisory group finds that in order for U.S. ag commodity production activity to remain economically viable, land rent must decline. The report, “The Land Value Wave Dips: Land Values Set to Decline Further, Despite Sticky Rental Prices,” explores the impact of low commodity prices on land values and rent prices.

The report goes on to note that from 2006 to 2013, significant increases in commodity prices, due to surging demand, signaled the need for more land to be converted to row crop production. The subsequent steep increases in agricultural land values have pulled enough acres into row crop production to oversupply most commodities, both domestically and globally.

“The result of this oversupply has been to drive agri commodity price levels below breakeven. After two years of economic losses at the farm level – which resulted largely from the significant drop in commodity prices – the cost of renting land remains sticky and unsustainably high,” notes report author and Rabobank senior analyst Sterling Liddell.

According to Rabobank, in 2017/18 and moving forward, rent values need to begin dropping in order to balance with lower commodity prices over the long term.

“We believe this will lead to the valuation of land also adjusting lower,” notes Liddell. “If rental costs remain sticky at unsustainable levels through the 2017/18 growing period, individual land assets face the threat of much deeper devaluation, as nutrient and crop protection programs are cut and abandonment (usage changes) increases.”

A full copy of “The Land Value Wave Dips: Land Values Set to Decline Further, Despite Sticky Rental Prices,” is available by contacting Sarah Kolell at Rabo AgriFinance or Jessup Wiley at Rabobank, N.A.

CONTACTS: 
FAR Report Requests/Media Inquiries

Sarah Kolell
Rabo AgriFinance
(816) 516-7984
Sarah.Kolell@RaboAg.com

Jessup Wiley
Rabobank, N.A.
(559) 447-7946
Jessup.Wiley@rabobank.com

About Rabo AgriFinance

As a leading financial services provider for agricultural producers and agribusinesses in the United States, Rabo AgriFinance adds value using industry expertise, client-focused solutions, and by creating long-term business relationships. Rabo AgriFinance offers a comprehensive portfolio of services that gives producers the right products to prepare for, and take advantage of, market opportunities. Rabo AgriFinance representatives offer a wide array of financial services and knowledge to help customers realize their ambitions. This comprehensive suite of services includes loans, insurance, input finance and effective risk management products. Rabo AgriFinance is a division of Rabobank Group, the premier bank to the global agriculture industry and one of the world’s largest and safest banks.

About Rabobank, N.A.

Rabobank, N.A. is a California community bank and a leading provider of agricultural financing and full-service banking products to California consumers, businesses, and the agriculture industry. With nearly 120 retail branches, we serve the needs of communities from Redding to the Imperial Valley through a regional structure that promotes local decision-making and active community involvement by our employees.

Rabobank, N.A. is a division of Rabobank Group, the premier lender to the global food and agricultural industry and a financial services leader providing commercial, retail, and agricultural finance solutions in 48 countries around the world. From its century-old roots in the Netherlands, Rabobank has grown into one of the world’s largest and safest banks. www.rabobankamerica.com