Kay McDonald points us to newsletters from the Kansas City and Chicago Federal reserves which have very interesting data on farm prices and farm incomes. The graph above shows the year-over-year changes in farmland prices in the tenth district (Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico).
The shape may remind regular readers of this:
Perhaps no surprise that when food prices go up, farms make more money and farmland becomes more valuable. A good time to be a farmer. Of course this is coming after a very long interval of misery for farmers. This picture from the Chicago fed shows longer term farmland prices for the seventh district (Illinois, Indiana, Iowa, Michigan, and Wisconsin):
Ignore the black (nominal) line and focus on the green inflation-adjusted one. Farmers were on average losing money for decades following the peak of the 1970s, and so farms lost most of their value in the eighties and only reached the 1979 value again in the late aughties. After a 22% increase in 2011, they are now well above it.
Overall, I take this data as confirmation of the views I expressed in the Fallacy of Reversibility a few years ago: that peak oil would tend to strengthen the industrial agricultural system by improving farm profitability via the biofuel channel. As the plateau in crude+condensate production has continued since 2005, more data has accumulated and indeed farmers are making a lot more money than they were before then:
The year 2011 may go down in the annals of U.S. agriculture as a once-in-a-generation phenomenon. Undergirding the huge upward movement in farmland values was an unusual shift up in agricultural prices across the board. Not only did major crop prices move higher, but key livestock and dairy prices were higher as well. Corn, soybean, and wheat prices averaged 57 percent, 26 percent, and 45 percent, respectively, higher in 2011 than in 2010. Milk, hog, and beef cattle prices rose 23 percent, 21 percent and 21 percent, respectively, although producers faced costlier feed as well. (These figures were computed from U.S. Department of Agriculture [USDA] price data.) According to the most recent USDA estimates, these agricultural price increases helped set a nominal record for net farm income of $98.1 billion in 2011, a 24 percent jump above 2010 levels.Of course there are risks in this. Farmers will be taking out loans, signing leases on acreage, and buying equipment based on these higher valuations. That means either food prices have to stay high - or go yet higher - or farmers will suffer. There is a risk of bubble dynamics developing if farmers and investors get used to rising prices and start to feel that they are bound to continue. And if food prices go higher, that will be destabilizing to some sectors of society, particularly poor urban neighborhoods. That's what we saw in the Arab Spring last year - and while that may end up being beneficial to the societies in question (I think the jury is still out on that), there is probably only so much of that kind of thing that the world can cope with at any given time.