Despite a rough couple years for farmers hurting from low grain prices, their bottom lines may be improved by rising land values.
According to the USDA, nationwide U.S. farm real estate values rose to an average of over $3,000 per acre, a gain of 2.4%. Price gains have been led by the Southern Plains, where years of terrible drought have been lifted, helping to boost interest in pastures and cropland.
Prices are also being boosted by increasing interest from investors in farmland. Seeking to diversify their portfolios, some investors are flocking to farmland, a limited resource that pays rent. These investors are especially interested because they expect rising global food demand but little new acreage for crops. As investors have been buying up land, cash farmland rent has risen 2% to a nationwide average of $144 per acre.
Longer term, rising land values and rents can help landowners, especially farmers with established operations, but farmers short on land could find themselves trapped, unable to find cheap acreage to plant.
Crude oil prices declined to a four-month low on Friday, trading for a mere $44 per barrel. As oil dropped, so too did gasoline and diesel fuel, which have each fallen over 50 cents per gallon in the past few months.
Prices are dropping due to increasing supplies and rising drilling activity, which could keep the glut flowing for a long time. On the demand side, oil traders are concerned that the US Federal Reserve will raise interest rates, curbing economic growth. Meanwhile, China, the world's largest energy consumer, continues to show signs of economic trouble, undercutting demand hopes there.
In addition to watching production and demand figures, traders must also watch Washington debates. Political analysts warn that there has been increasing Democratic opposition to President Obama's Iranian nuclear deal, led by Sen. Chuck Schumer (D-NY). Should the Senate get a veto-proof majority in line against the deal, Iran's 25 million barrel stockpile would remain off the market, boosting global oil prices.