Farm assets increased "dramatically" from $53 billion in 1940 to $585 billion in 1976 and the outlook for farmland is bright, the public accounting firm of Coopers & Lybrand reports.
"Inflation in farm real estate prices has generally increased at a faster rate than the gross national product deflator index," the firm says in a report published in the current issue of its real estate newsletter.
"Support for higher farmland values in the U.S. has resulted from higher population and income growth. Generally, then, farm real estate has proved itself to be good protection against inflation," the publication said.
Looking to the future, it observed: "Farmland will continue as a good long-term investment when it is realistically priced and when it can generate cash flow sufficient for debt service. While short-term stability or declines in land value may occasionally occur, long-term declines in the value of farmland are unlikely."
The accounting firm also reported that farm real estate has exceeded its 1940 value by 12.5 times, growing from $34 billion to $422 billion by 1976. In this period, though, total $10 billion in 1940 to $91 billion by 1972.
Over-all, the value of the real estate involved represented 64 per cent of farm assets in 1940 and 72 per cent of farm assets in 1976.
The accounting firm pointed out that government payments to farmers since the mid-1930s have supplemented farm income significantly. "While cash receipts to farmers through government payments have risen and fallen during the past 40 years according to economic conditions, such income maintenance has greatly reduced the risk level of farming thereby increasing real estate values," the publication said.
Again looking ahead, the publication said that the demand for both farm enlargement and nonfarm uses implies "an increasing competition for farmland which should increase the sales price of farmland."