Ag economists at Texas A&M are predicting that the red-hot Texas land market will lose its sizzle next year. Since 2003, land prices have increased an average of 14.5 percent annually, and with the median price statewide approximately $2,300 per acre, that means the average price would jump to $4,600 per acre by 2013. According to the Aggies, that’s not going to happen. Here’s why:
1) FALLING COMMODITY PRICES. Higher oil costs pushed grain prices to record levels this year. But as oil dropped, so did the support for ethanol, and less demand for ethanol means lower corn prices, which will cool the demand for cropland.
2) STRONGER DOLLAR. As the American dollar continues to grow stronger, American foodstuffs become more expensive overseas. End result? Less demand.
3) TIGHTER CREDIT. Any explanation needed? See your banker to discuss.
4) THE BURGEONING FEDERAL DEBT. Since about one-third of the federal debt is held by foreign investors, the global slowdown means the U.S. Treasury will have to pay higher rates to attract and hold these funds. As the Treasury increases its rates, U.S. borrowers will feel the pinch.