|Farming- A growing profitable Vocation in USA?|
Saturday, 03 March 2012 00:00Written by Uma Desu
While housing prices across the country have remained flat or on the average declined, Farmland prices surprisingly have risen very fast in the past year in USA.
Aided by warmer weather and signals that the real estate market is on the road to stability, Housing starts in January increased 1.5% to 699,000 annual rates per commerce department data.
In its Quarterly Survey of Agricultural Bankers, the Federal Reserve Bank of Chicago has reported that Farm lands actually rose 22% in 2011 in the Midwest. Kansas City reported 25% growth in Q4-2011 compared to Q4-2010. Even after adjusting for inflation, this has been the highest increase in land rates since 1976. The land price increases correspond to food price increases as well. Corn prices rose 57% in 2011, while wheat and soybeans rose 46% and 26% respectively. Milk and Cattle Prices were up 23% and 21% per Bloomberg Article on Feb.16th. In Nebraska, farm land prices rose 40% in 2011 according to the Federal Reserve.
Some investors have bought thousands of acres and farming has become profitable again. Investors also believe that the price rise is not a bubble since the fundamentals (commodity price increases) are there to support the price rise. DesMoines Register reported that many professionals are putting their savings into farm land rather than savings banks deposits or stock markets. Automation in farmland equipment is also helping allowing farmers to do more with less staff. DesMoines register reports that nearly 20 million acres have been dedicated for soybean exports to China. So rising food demand in Asia has also helped shore up food prices.
This has also led to increase in demand for Potash and Phosphate mines which are limited to only few countries worldwide. India imports nearly 70% of its phosphorous fertilizers and 100% of potash fertilizers according to Economic Times of India.
In the U.S., government is encouraging young farmers by providing those loans and guidance since they are replacing aging farmers. The interest in farming is coming from city based people who want a quite life. This hopefully will stem the migration from rural to urban and foster a reverse migration- back to the farms.