Agriculture, land prices set to explode to upside

Many are wondering where will the “black swan” might from that could burst what many see as a bubble?


Richard Brock, National Hog Farmer

Nov 22, 2021


Agriculture Prices Exploded to Upside


For those of us who have been around long enough to remember, the current economic climate in agriculture is reminiscent of the mid-1970s. After being in the doldrums for a while, grain prices and farmland prices all exploded to the upside.


Since September, December ethanol futures have risen from $1.80 per gallon to $3.00 per gallon. The profitability of ethanol plants is now back to the levels of 2014 (see chart below). Many in the industry thought it was not possible to get there. This has resulted in the strongest corn basis in recent memory throughout the Midwest as ethanol plants scramble to buy corn during a slow harvest amid farmers who are unwilling to sell.


Land Prices Explode


The sharp rise in commodity prices, cheap money/credit and lots of it has resulted in the biggest increase in farmland values since the mid-1970s as well. The chart below does not do the market justice as USDA data is only up to date through August. Starting in September productive farmland throughout the Midwest has soared into new highs. Productive land in Illinois, for example, is selling consistently from $16,000 - $17,000 an acre. Some sales where three people start bidding against one another in several states in the Midwest have exceeded $20,000 per acre. It takes crazy to a new level. But combine cheap credit, very profitable farming, and farmers with ample cash, and all of a sudden we have tulip mania.


How Long Can This Last? ...


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