FDIC chair warns of possible US farmland ‘bubble’

* Says U.S. farmland values requires “close monitoring.”

* Farmland values 58 percent above 2000 levels

By Carey Gillam

KANSAS CITY, Mo., Oct 18 (BestGrowthStock) – U.S. farmland could be
the next asset bubble at risk for bursting, a leading banking
regulator said on Monday.

Sheila Bair, chairman of the Federal Deposit Insurance
Corp., said it was important to monitor U.S. farmland values
for signs of instability like the price bubbles in the housing
and stock markets that burst with disastrous consequences for
many investors.

Farmland values remain 58 percent above their 2000 levels
in inflation-adjusted terms. Investors have been snapping up
high-quality land in the Midwest where row crops like corn and
soybeans are grown as well as orchards for high-priced nuts and
berries along the U.S. West Coast.

While commercial and residential real estate prices have
fallen sharply, farmland valuations have remained strong during
the recession. But Bair said those “positive fundamentals”
could change.

“A sharp decline in farmland prices similar to the early
1980s could have a severe adverse impact on the nation’s 1,579
farm banks,” Bair said in a speech delivered to a risk
management group in Baltimore.

“While the credit structure underlying U.S. farmland does
not appear to involve excessive leverage or inappropriate loan
products, this is a situation that will continue to require
close monitoring,” she said.

Bair is a member of the newly established Financial
Stability Oversight Council made up of the Treasury, the
Federal Reserve, the FDIC and other financial regulatory
authorities. FSOC held its first meeting on Oct. 1.

(Reporting by Carey Gillam; Editing by David Gregorio)

FDIC chair warns of possible US farmland ‘bubble’