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More proof that farmland is leveling off?

The momentum behind the idea that farmland values will slow in their climb in the nation's midsection is growing, with a land expert in another state in the region calling for values "nearing a peak."

An annual survey of farmland stakeholders in Missouri, led by University of Missouri Extension ag economist Ron Plain, shows a year-over-year 17% price climb for cropland rated "good." That land is now worth, on average, $4,510 per acre, while pastureland with the same rating gained 12% in the last year to a per-acre cost of $2,492 an acre.

Those increases are in line with nearby states, but so is the growing expectation that the climb will level off sharply in the next 12 months.

"A lot of respondents think we may be, at least short-term, nearing a peak in Missouri farmland values," Plain says in a university report. "Over the next 12 months, respondents expect the rate of increase in cropland values to slow to 2.6%, while pasture values increase about 1.3% and noncrop/nonpasture values increase 0.8%."

The survey also shows land for timber or recreational use rose 10% in price in the last year to settle at $1,817 and $1,724, respectively.

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Farmers remain the largest group of land buyers in Missouri; Plain's survey shows 69% of those buying land were planning to farm the land themselves, while 22% intended to rent it to a farmer; 9% said they did not plan to farm or rent out the land.

The primary drivers behind the slowing land outlook are also similar to other Midwestern states, Plain adds: "Factors cited by many respondents as supporting farmland prices were similar to last year -- low interest rates, low returns from other types of investments, crop insurance, high grain and livestock prices (profits)," he says. "Changes in any of these factors could affect land prices negatively."

Missouri is a little different than some nearby crop-growing states, namely in the variability in the state's grain production potential. That variability in likely output makes the outlook for land just as variable.

"Respondents from areas with very productive cropland reported continued demand for large tracts of good cropland but few sellers. They saw local farmers in a strong cash position with the technology and confidence to farm more land and other investors who anticipated a good return from crop share or cash rent," Plain says. "In south-central areas with very little cropland, the respondents saw less increase in land values. Operating margins were thin, and few local residents could afford to buy more land."

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