Land demand for purchase and rent will be a "mixed bag" in 2016. Any Federal Reserve interest rate increase will have minimal impact.

Dunn's diagnosis
Agricultural land prices have showed a lot of regional variation in the past year. Some tracts are the source of fierce competition; others are finding a weak market when they become available.

Demand is heavily dependent on area agriculture. For example, in the Lancaster, Lebanon and Berks County areas of Pennsylvania, land competition is very strong – driven by the poultry market.

LAND DEMAND? While land demand is constant, buying ability will be reduced due to lower grain and dairy farm income and profit margins.

The expansion of layers, including cage-free, and broilers have been especially important. This includes parcels with no development pressure. Even land rents have been very high – some reaching $550 an acre. Smaller farms especially are commanding high sale prices, up to $20,000 an acre. One source described competition as cutthroat, where family members and close friends compete for the same parcels.

In central Pennsylvania, valley population composition is important. Amish valleys are seeing stable prices; non-Amish valleys show some slippage. Some crop farming renters have had buyer's remorse, as the lower corn and soybean prices haven't supported what renters once paid.

In Pennsylvania's northcentral tier, prices are still solid, although softer. The Marcellus shale gas boom influence has abated. Western Pennsylvania's Utica shale boom is still pushing land prices well beyond ag-use values.. The gas drilling excitement has led to "rosy scenarios", often despite contrary evidence.

While the Federal Reserve Bank has yet to raise interest rates, it's likely do so in the near future. I doubt, though, that it'll be substantial. Higher interest rates might make the dollar stronger, which would further depress farm prices for exported commodities.

Ifft's insights
While Northeast farmland prices may begin to weaken, there's more upside potential due to the myriad of local farm and nonfarm conditions. Most farms maintained strong leverage and built up working capital during recent high-income years, and should be able to weather farm revenue downturns. Farms with a weaker financial status will continue to face pressure, and may lead to more land coming on the market and putting downward pressure on prices at the margin.

Low commodity prices do have spillover effects for land used for livestock or specialty crops. However, that effect will likely be somewhat muted in the Northeast. Like politics, "farmland markets are local".

That's due to our having many types of successful farm specializations, highly variable soil quality and types, plus diverse sources of non-ag demand for farmland. One area may have an ethanol plant, development pressure from a nearby urban area, or vibrant markets for "local food". Areas farther from urban markets with marginal soils may see continued low farmland prices.

Dairy farm income has a larger impact on Northeast land prices than in other U.S. regions. Current forecasts indicate softening milk prices in 2016 and higher production. Overall, that indicates 2016 dairy profits won't be a farmland price pressure source. However, there still may be competition between dairies needing land to meet nutrient management plan requirements and on areas with strong local demand, for example, from a new milk plant.

Dunn and Ifft are ag economists at Penn State University and Cornell University, respectively.