US farmland enters the New Normal

New Normal logo.pngThe downturn in the US housing market is turning out to have a silver lining, according to the Wall Street Journal.

It describes how farmers in some areas are now able to buy back land previously sold for housing development, and return it to agricultural use:

• Residential land value has fallen 70% since the Q2 2006 peak
• Agricultural land value is up ~20%

Thus one Arizona farmer has paid $8m to replant alfalfa and cotton on land sold in 2005 for $41m. Whilst a group of Chicago farmers have bought back land for $8k/acre that was originally sold for twice this value.

As one farmer notes “these prices are becoming the new normal”, due to the “major demographic shift” now underway in the USA. Land is no longer needed for new housing developments in the countryside. Instead the Boomers are preferring to stay close to the cities.

This is another example of the challenge facing chemical companies, as we transition to the New Normal. Most Boomers will have to cut back on spending as they face the prospect of living on a pension, rather than a salary. In turn, this will have a major impact on future demand patterns.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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