A RESURGENT RURAL ECONOMY SPURS FARMLAND VALUES Net farm income in 2004 easily surpassed the record high of 2003. Meanwhile, in the non-farm rural economy, stronger job growth and higher incomes replaced the weak growth of recent years. Combined, the stronger farm and non-farm economies bolstered rural land values. Will that trend continue in 2005? Jason Henderson, senior economist at the Center for the Study of Rural America at the Federal Reserve Bank of Kansas City, and Nancy Novack, associate economist, review the performance of the rural economy in 2004 and look ahead to 2005 in “A Resurgent Rural Economy Spurs Farmland Values.” The article is featured in the first quarter edition of The Economic Review. In 2004, livestock producers enjoyed high demand and strong prices as the market overcame concerns about Mad Cow disease while crop producers were aided by favorable growing conditions and strong harvest. As a result, net farm income soared to a record $73.7 billion, up from the previous record of $59.2 billion set in 2003. Meanwhile, after two years of weak growth, the rural Main Street recovery gained steam with both job and income growth showing a broad-based rebound. For land values, rising farm incomes were quickly capitalized into farmland prices, the authors write, while strong nonfarm activity supported both residential and commercial demand for real estate. Looking ahead, the authors write that the foundation is set for another solid year in the rural economy, although there are some challenges. While farm incomes are expected to remain strong, the industry will have to monitor trade developments and threats of soybean disease. The authors expect nonfarm rural economic growth, meanwhile, to strengthen with the rest of the nation. The article is available on the Bank’s web site at www.kansascityfed.org. ### Return to
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