By DANIEL GRANT | FarmWeek
The Federal Reserve approved a rare half-percentage-point interest rate hike this month as it attempts to reel in inflation.
The move marked the first time the Fed increased interest rates by .5 percent, or 50 basis points, since 2000. Rate increases often occur by quarter-point increments.
It raises the central bank’s benchmark federal-funds rate to a target range between .75 percent and 1 percent. The Fed also announced plans to shrink its $9 trillion asset portfolio starting next month to ease inflation, which jumped 8.5 percent in March — the highest since 1981.
Overall, the Fed’s goal with the interest rate hikes is to tamp down demand for goods and services to help ease inflation. It previously boosted rates by 25 basis points in March. But will higher rates also slow the farmland market?
Ray Brownfield, designated managing broker/owner of Land Pro LLC based in Oswego, isn’t necessarily sold. He looks for commodity prices to remain strong, due in part to a number of supply shocks around the world, and continue to support farmland values.
Investors also see farmland as a hedge against inflation.
“For those who for various reasons are contemplating the sale of their farmland, the price of their land will most likely remain strong even with higher interest rates,” Brownfield said. “On the other side, investors continue to see the stability of a farmland investment and the continued global need for production from this land.”
Land Pro reported recent farmland sales in northern Illinois fetched $18,200 per acre in Kendall County and $20,100 per acre in LaSalle County in mid-April.
Linda Brier, area real estate manager for Farmers National Co., also doesn’t foresee a major downturn in the farmland market any time soon.
“As long as commodity prices stay up and there’s still uncertainty with inflation, investors are competing against farmers,” she told FarmWeek just before the latest rate hike.
Farmers National Co. recently reported the number of farmland auctions increased 65 percent, the amount of acres sold jumped 106 percent and the value of those auction sales climbed 130 percent in the past six months.
This story was distributed through a cooperative project between Illinois Farm Bureau and the Illinois Press Association. For more food and farming news, visit FarmWeekNow.com.
