Low Crop Prices Drive Down Farm Values, Tractor Sales

U.S. farmland prices fell for a ninth successive month, amid worsening agriculture sector sentiment that has sent conditions in the farm machinery market to the worst in at least nine years, Agrimoney.com reported.

An index compiled by Creighton University showed farmland prices in major farming states such as Illinois, Iowa and Kansas at 41.4 for August, below the 48.3 points recorded for July, and the 50.0 mark that indicates a neutral market.

The deterioration, reflected the drop in grain prices that has curtailed farm profitability.

“Agriculture commodity prices have plummeted for crop farmers in our region and are expected to move even lower in the months ahead,” said Ernie Goss, the Creighton University economics professor in charge of the survey. He added that “the rapid decline in agriculture commodity prices is causing farmers to become more cautious in their equipment purchase.”

The farm equipment market saw an index reading of 25.5, a record low, below the “very weak” reading of 33.4 for July.

Data from the Association of Equipment Manufacturers show the decline affecting in particular larger machinery, with U.S. sales of four-wheel-drive tractors down 11.0% in the first seven months of 2014, and combine volumes dropping 15.2%. Sales of smaller tractors have grown by 3.3%, supported by the boost lower crop prices have given to livestock producers, major buyers of less powerful machinery.

Creighton said that its research indicated expectations of further weakness to come in the agricultural economy. Bank chief executives interviewed said they expect land prices to fall by 4.8% over the next 12 months. S