NEWS

US farmers & ranchers reel as Russia/Ukraine war causes gas shortages

Jason Burbage
National Land Realty
As we prepare for the coming winter, many landowners may be concerned about the state of the land industry as it relates to their investments and properties.

As we prepare for the coming winter, many landowners may be concerned about the state of the land industry as it relates to their investments and properties. However, this is understandable given the many factors currently putting pressure on the industry.

Farmers and Ranchers Will Face Increased Energy Prices

Just as many farmers and ranchers are reeling across the nation due to the ongoing droughts that have plagued parts of the country, they will likely need to deal with an upcoming lack of natural gas and fertilizer. The ongoing war between Russia and Ukraine has significantly damaged the natural gas supply of Europe as a whole, given that Russia is responsible for providing many European nations with their natural gas supply. Shortages in Europe mean natural gas will garner a higher price overseas due to a lack of supply. In addition, American natural gas companies will likely export a more significant portion of their natural gas overseas due to the increased profit potential. Ultimately, this may leave working-class Americans to foot the bill by paying inflated and excessive energy bills this winter. These high bills could be challenging for farmers who need to heat multiple barns or outbuildings throughout the winter.

Increased Fertilizer Prices Will Pressure Farmers

Another effect of the natural gas shortage in Europe will be a lack of available fertilizers. Many fertilizer-producing plants and companies have begun to halt the production of more fertilizer due to the increasing costs of natural gas, which is necessary for their plants to operate. While the US is not as dependent on Russian natural gas for our energy, as noted earlier, selling US natural gas to Europe is sure to contribute to higher crop/fertilizer prices here.

Food-producing Land Will Maintain Its Value

Despite these challenges, food-producing land holds its value remarkably well and is increasing in many areas, especially the midwest. In specific locations, 2022 has seen as much as 20% increases in farmland. Land values in Iowa have eclipsed previous records, with some land hitting $26,000 per acre. We view land values like those in Iowa as plateauing, but other states are rapidly catching up to these prices. Farmland with rich soil and enough water to maintain food production demand a premium in this market. With the conflict in Ukraine impacting gasoline and commodity prices, these values will likely hold until supply chains are re-established.

Landowners Still Fear Recession

As the US braces for some form of recession and the likelihood of further interest rate increases, it’s understandable that many Americans are feeling uneasy. We have indeed begun to feel that at National Land Realty, as we have seen fewer new listings coming our way in recent months. We understand that many landowners are likely hunkering down and preparing to endure any upcoming economic downturns.