News & Analysis

USAG says Brexit could lower US farmland values

Depressed commodity prices could be brought down further by Brexit market turmoil, meaning lower farmland values but better entry opportunities for investors, said USAG board chair Howard Halderman.

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US Agriculture board chair Howard Halderman has said that the recent Brexit vote could put further downward pressure on US commodity and farmland prices.

“If Brexit causes the dollar to be viewed as a safe-haven and it goes back up [in value], that will be a negative for commodities, which would be a negative for farm incomes. Lower farm incomes generally will lead to lower land values over time,” Halderman said.

The firm, which invests on behalf of the New Mexico Education Retirement Board, Arkansas Teachers Retirement System and a family office outside the US, previously said it sees falling farmland values in grain-producing states as an investment opportunity.

“Generally speaking the Corn Belt [and] Delta devaluations that [are] going on right now [are] creating a buying opportunity. For those investors looking to get into agriculture it’s a better buying time than it was two or three years ago,” he told Agri Investor.

A slowdown in growth or market chaos would probably lessen demand for protein and livestock feed, affecting commodity prices and therefore row-crop farmland values, said Halderman. Brexit’s currency impact could be borne out in grain prices as soon as this week, he added.

“Farmland values are already off 10 to 20 percent, [compared] to the highs seen in 2013 and 2014. They may go a little bit lower.”

Halderman said it is impossible to be sure when farmland have bottomed out, due to commodity price volatility Instead, he suggested that long-term demand projections and prices below previous highs make it a good time for asset managers who invest throughout the cycle to seek deals.

“We view that as a buying opportunity, because the long-term demand fundamentals — the need to double food production by 2050 and those kinds of things — they still remain in place,” said Halderman.

His observations come after a study suggesting Brexit currency fluctuations could lower global pork prices for US producers, as Europe and the US compete for import markets like China.