FARMERS tend to be a gloomy lot. "Worse than last year, better than next" is their characteristic response when asked about economic conditions. But they should be a bit more cheerful at the moment. American farmland values have doubled since 1990 in real terms; on the same basis British farmland prices are up by 135% over the past decade. Even more remarkably, farmland prices have been much more resilient than residential and commercial property values in the wake of the credit crunch. British prices are more than 15% above their early-2008 levels. In a way this is rather odd. Economists agree that this is the worst crisis since the second world war; there has been talk of another Depression. Yet farm values have held up much better than they did in the 1930s or even in the 1980s, when prices fell by around a third in real terms as commodity prices dropped and the Federal Reserve used high interest rates to squeeze inflation out of the system. The Federal Reserve Bank of Kansas City, situated in the heart of America's farm country, concluded earlier this year that the surge in farmland prices had been driven by a combination of low interest rates and high commodity prices. In the past low rates would probably have been accompanied by low commodity prices. After all, central banks usually cut interest rates in response to weak demand and low inflation. In this cycle, however, there is a contrast between weak demand in the developed world and booming demand in emerging markets. American and European consumers are no longer price-setters for commodities. They are price-takers.
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