Farmland prices have slipped for a third successive month in the US, and share prices in agricultural groups markedly underperformed the market, raising a question mark over the sector’s standing with investors.
Farm values, while continuing this month a rise in prices stretching back to the start of 2010, rose more slowly than in June, with a price index falling to 59.4 from 62.0, Creighton University said, following a survey in main farming states including Illinois, Iowa and North Dakota.
Any figure above 50 indicates growth.
"We are tracking consistent slippage in farmland price growth as the index has declined for three straight months," said Creighton economics professor Ernie Goss, adding that many other indicators for the rural economy were "trending lower too".
An index for the farm equipment market fell to 53.7 from 63.1 in June, a fourth successive month of decline.
The data came as analysis from the University of Illinois showed that shares in agriculture companies fell in the April-to-June quarter by an average of 6%, a contrast with a small rise in the average stock, as measured by the Standard & Poor’s 500 index.
"Unlike in previous quarters… the Agindex decline is not accompanied by a decline in the S&P 500," University of Illinois professor Gary Schnitkey said.
Declines in agriculture shares were "widespread", although led by processors such as Archer Daniels Midland, Bunge and Corn Products International, which suffered an average fall of 10%.
Fertilizer groups, including Agrium, Mosaic and PotashCorp, fell by 9%, while seed groups, such as Monsanto and Syngenta, proved the most resilient, easing only 1%.
Futures market trend
The performance came in a quarter which ended weakly for prices of many food commodities too, hurt by a wave of liquidation among speculators, stoked by macroeconomic fears, with Greece’s debt crisis and China inflation concerns in full spate.
Wheat, in particular, felt pressure from the US harvest and the announcements of Russia’s return to grain exports.
However, latest data showed investors returning to farm commodity market, with the total net long position held by managed money – a proxy for speculators – rising by more than 100,000 contracts in the week to July 19, its highest since February.
On US Commodities’ assessment, "speculators last week had the largest investment in 18 commodities in a year".
And, at Barclays Capital, Sudakshina Unnikrishnan said that the data "showed that tactical investors held a largely positive view on agricultural commodities, reducing positive exposure only to cocoa and coffee".