From farmprogress.com:
Despite a global economy that’s showing signs of toughness and making progress in tackling high prices, the International Monetary Fund’s October 2023 Global Economic Outlook shows bumpy roads are ahead.
Recovery from the pandemic’s ripple effects, the conflict in Ukraine and the growing divide in global trade will be like combining downed corn – slow and tough, especially for countries still developing their economies.
The world’s economic growth is expected to dip from a decent 3.5% in 2022 to just 3% in 2023, and even a bit lower to 2.9% in 2024, which is not as good as the usual 3.8% we saw from 2000 to 2019. The big economies, including ours, might see a slowdown, despite the U.S. doing a bit better than expected. However, Europe’s slower growth and issues like China’s housing market troubles are like pests in the field, affecting everyone.
Looking at the next few years, that means the global economy isn’t expected to grow as strong as we’d hope, making it harder for countries to improve living standards. And while prices might start to ease up, they’re still expected to be higher than what we’d like until at least 2025.
With all this uncertainty, is now the right time to buy farmland?
In my lifetime, farmland values have risen and fallen and risen again. Prices may continue to rise even higher than they are now, or they could retreat. The two fundamental questions we need to ask ourselves are: Is farmland a good investment? And what are the current fundamental drivers of farmland value?
Farmland has been a good investment. In the University of Illinois farmland index, we find that every $100 invested in farmland in 1979 is worth over $500 today. Research also indicates that farmland investments have produced the best returns at the lowest risk over the last 30 years.
But will farmland continue to be a good investment? Let’s look at some of the economic forces that drive farmland value today.