According to Bruce Sherrick, professor at the University of Illinois, you might not need to worry about what inflation is doing to your farmland values.
From AgWeb.com:
The Federal Reserve is hosting its Economy Policy Symposium this week, which has all eyes on Jackson Hole Wyoming for further details on inflation, interest rates and if a recession is looming. But would a recession effect your operation the way you think?
According to Bruce Sherrick, professor at the University of Illinois, you might not need to worry about what inflation is doing to your farmland values.
“Farmland returns are very highly correlated with inflation,” Sherrick says. “Most importantly, it has a positive correlation with inflation.”
Sherrick says this correlation is derived from the size and debt of the industry.
“Put the entire holdings of the country on one balance sheet and it’s now four trillion plus and only 13% leveraged, so 13% debt underneath it,” he says. “An interest rate change doesn’t have as big of a proportional impact as if you were talking about companies traded on the stock exchange, where the average leverage turns out to be around two-thirds.”
While the percentage of debt is low in comparison, he also highlights it’s mostly long-term, fixed-rate debt. Increasing interest rates won’t have as large of an impact on that, but it will decrease transactions.