According to a recently released report from Jason Henderson and Maria Akers of the Kansas City Federal Reserve Bank:
Bankers in the Chicago, Kansas City, Minneapolis and St. Louis districts reported that rising crop prices [and crop insurance payments] offset high input costs, boosting farm incomes. Profits in the livestock sector, however, suffered under high feed costs.
This is an insight into the inherent volatile nature of livestock enterprises. Although returns can be great in a good year, livestock enterprises generally have more volatile income profiles over the long term than cropping enterprises.
This is certainly the case as a general rule in Australia and it's something agricultural investors need to be aware of if reliability of income is an important investment driver.
The report also noted that despite the drought in the US farmland prices continue to rise driven by strong buyer demand:
Despite the drought, farmland values continued to rise across the nation's mid-section. Bankers in the Corn Belt and northern Plains reported strong year-over-year farmland value gains. In Nebraska and South Dakota, non-irrigated cropland values remained more than 30 percent above year-ago levels. In the eastern Corn Belt, farmland values rose between 10 and 15 percent
Good news for agricultural investors who bought a few years ago.
As we note in another recent article, farmland prices in Australia are way, way lower than the US, so for investors who want to get into a market that's a little less frothy where the fundamentals are still solid, it's certainly not too late.