10 global factors that influence farmland value
Think prices for Illinois farmland are determined only by location and soil grade? Think again. Tim Hopper, chief economist for the TIAA-CREF financial services organization, says these 10 global trends will also affect farmland's long-term value.
1. Water. China has 20 percent of world population, but only 6 percent of world's water resources. May look to U.S. to help produce food.
2. Wall Street. Agriculture is historically an undercapitalized economic sector. But financiers may come up with better ways to allocate capital.
3. Interest rates. Treasury bills offer virtually no return now, making farmland look attractive by comparison. A rise in rates could change that.
4. Shale energy. U.S. has become largest producer of oil and gas, perhaps affecting need for fuel substitutes such as corn-based ethanol.
5. Foreign exchange rates. Falling dollar increases payback to farmland by boosting commodity prices, creating higher income stream for U.S. farmers.
6. Regulation. Government decisions on renewable fuel standards, foreign ownership could influence land values.
7. Consumer preferences. High-value crops, such as wine and almonds, are displacing row crops. U.S. wine consumption up 14 percent a year.
8. Rise of China. World's biggest country focusing on pollution, water and food safety — and looking abroad for answers.
9. Global trade. World economic growth has accelerated since 1970, with global trade at a level 50 times what it was then.
10. Global population growth. Standards of living rising rapidly in some areas, triggering shift in diet from starches to proteins.
Hopper spoke at a Farmland Markets Conference in Champaign this week.