On The Other Side Of Over-Optimism
NBC News reports on Iowa. “In agricultural communities across the country, financial worries are growing as quickly as farmers’ unprofitable crops. They’re suffering from the worst agricultural slump in more than a decade — and a major source of federal assistance has run dry. In Durant, Iowa, a rural town of less than 2,000 residents, the punishing combination of economic factors, including a plunge in commodity and farmland values, is bringing in more farmers than usual to lenders at Liberty Trust and Savings Bank, said bank vice president Michael Hein.”
“‘Right now, we’re dealing with a depression in all of our commodities, livestock, and grains. We have corn and beans that are both priced below production costs, and our cattle market has taken a downturn,’ Hein told NBC News. ‘It’s an across the board situation right now.’”
The Forum News Service on Minnesota. “Farmland values in west central Minnesota have softened, still sliding from the peak reached in 2013-14 when commodity prices were at their high too. Believe it or not, until the housing bubble burst, urban sprawl in the Twin Cities had a ’significant’ impact on farmland values in west central Minnesota. Developers were making lots of money and investing in farmland to defer capital gains taxes.”
“Some ‘had so much money in their pockets they needed to spend it somewhere, somehow. Many didn’t even negotiate it much, just purchased what was available,’ said Bryan DeGroot, owner of DeGroot Farmland Sales in Prinsburg. The bubble burst and stock prices tumbled. Still, investors continued to drive up farmland values through the years 2000-2010, DeGroot said.”
The Associated Press on Kansas. “A new government report shows the value of land and buildings on Kansas farms fell 7 percent last year. The National Agricultural Statistics Service said Friday farm real estate value in 2016 averaged $1,880 per acre. That is down $150 per acre compared to the previous year. Cropland values fell 7 percent to $2,050 per acre. Cropland with irrigation averaged $3,000 an acre, down $270 per acre. Cropland without irrigation averaged $1,940, down $150 an acre. Pastureland was valued at $1,290 per acre, down $100 per acre.”
From Hoosier Ag Today on Indiana. “The new 2016 Purdue Farmland Value Survey confirms that Indiana farmland values continue their downward trend. The average declines are 8.2 to 8.7 percent depending on land quality, and declines of this size haven’t been seen since the mid-1980s. Purdue agricultural economists Craig Dobbins and Kim Cook are the report authors and Dobbins told HAT it’s obvious what has values in retreat. ‘We’re adjusting to the lower income environment, the lower price environment, the lowered expectations about what prices are going to be in the future. Those sorts of things are really beginning to have an impact now. The evidence is pretty clear that we’re in a re-adjustment process when it comes to farmland values.’”
“The average farmland value has fallen about 13 percent over the last 2 years. The drop follows several years of spikes in the prices paid for farmland. ‘Yes, there was probably some over-optimism that was in the market,’ Dobbins says, ‘and now maybe we’re on the other side and of that and there’s over-pessimism in the market.’”
Eagle Country Online on Indiana. “According to the report, the downward trend in farmland values was consistent across the five regions of the state. ‘The collapse in grain prices and the impact of tighter gross margins are working their way through the agricultural economy,’ said Purdue agricultural economists Craig Dobbins and Kim Cook, authors of the report. ‘In addition, the farmland value change in this region did not support the conventional wisdom of top-quality land maintaining its value better than lower-quality farmland in a downturn,’ they wrote.”