Corn Plummeting Spurs Talk of '80s U.S Farmland Bust

[bverellen]

Disaster for some, opportunity for new farmers or ranchers to get into the game?


Corn Plummeting Spurs Talk of '80s U.S Farmland Bust: Mortgages - Bloomberg

http://www.bloomberg.com/news/2013-12-17/corn-plummeting-spurs-talk-of-80s-u-s-farmland-bust-mortgages.html


Quote:
Kohl said a plunge in land prices would strip value from farms and put over-leveraged farmers out of business. Farmland prices are up 72 percent to about $8,000 an acre in the last three years, according to data from the U.S. Department of Agriculture. In Iowa, the largest producer of corn, the gain was 90 percent, according to the Iowa State University in Ames.

The value of the nation's $2.5 trillion of farmland may tumble by as much as 30 percent in the next three years as the corn rush ends, according to Gary Ash, chief executive officer for 1st Farm Credit Services in Normal, Illinois.

"The increase in land prices was caused by the increase in corn prices," Ash said. "The reverse is going to be true. The drop in corn is going to result in a drop in land value."

In the 1980s -- the last time an agricultural land-price bubble burst -- thousands of families lost their properties. Farmers who bought additional land when prices were surging were caught with too much debt as commodity prices fell.

 

[loomixguy]

Will be self inflicted if the other shoe drops. Lots of good pasture bought for big dough, only to be torn up and put into corn with no irrigation.

 

[Jake]

As a young person trying to possibly buy land over the next few years. I welcome a drop. It's not like the profitability was great for a young person at these land values anyway.

 

[PureCountry]

bverellen - the link goes to a bloomberg page that reads "File Not Found".

I'm curious as to why corn is dropping so rapidly? If it's oversupply, what happened to Monsanto, Dow and Dekalb's theories that we have to have more, we have to produce more, we need more production to feed a starving global population???

If land prices do drop, foreign investors will be gobbling it up even faster than they already are. Especially since a drop in land values and corn commodities will effect alot of other commodity markets and consequently devalue the US dollar.

 

[4Diamond]

I get tired of the crop famers crying a river. How many pastures have been tore up the last few years for row crops? How many new tractors and combines and implements have been bought the past few years? How many massive air conditioned and heated shops have been built? Do these guys ever save for a rainy day?

 

[Jake]

bverellen - the link goes to a bloomberg page that reads "File Not Found".

I'm curious as to why corn is dropping so rapidly? If it's oversupply, what happened to Monsanto, Dow and Dekalb's theories that we have to have more, we have to produce more, we need more production to feed a starving global population???

If land prices do drop, foreign investors will be gobbling it up even faster than they already are. Especially since a drop in land values and corn commodities will effect alot of other commodity markets and consequently devalue the US dollar.

We went from the tightest carry out in history to the largest crop in history. Corn was never going to stay at $7+ forever. Too much incentive to break pasture, and plant everything to corn to satiate the markets need for corn. Another big corn crop this next year will most likely further break the prices.

I don't necessarily agree that corn prices breaking has anything to do with devaluing the US dollar.

 

[Kato]

Devalued dollar equals more exports, which means better prices. Unless you are importing, a low dollar is not all bad news.

The same thing is going on with the grain farmers here in Canada. Our neighbours are driving around in equipment we wouldn't even consider buying. If we could afford that combine, we'd rather take the money and retire. One of our friends says now that the grain markets are better, he's even more stressed than ever before. Expand expand expand seems to be the name of the game. However, at least in our part of the country there is no land even closely approaching eight thousand an acre.

 

[bverellen]

bverellen - the link goes to a bloomberg page that reads "File Not Found".

Thanks. Fixed it.

 

[SMN Herf]

I dont think its time to be just to doom and gloom here unless the price of oil drops significantly. The difference between now and the 80's is that we now have the ability to convert the excess into liguid energy and use it domestically or export it. In the 80's the govt paid people to store it. Lets hope the new farm bill isn't a fall back to the old policies of the 80's.

 

[nortexsook]

Cornholios are in denial. Almost a 50% drop in price.


Here's and audio of what has happened to Corn

http://www.hark.com/clips/wspcywglfn-down-goes-frazier

 

[PureCountry]

bverellen - the link goes to a bloomberg page that reads "File Not Found".

I'm curious as to why corn is dropping so rapidly? If it's oversupply, what happened to Monsanto, Dow and Dekalb's theories that we have to have more, we have to produce more, we need more production to feed a starving global population???

If land prices do drop, foreign investors will be gobbling it up even faster than they already are. Especially since a drop in land values and corn commodities will effect alot of other commodity markets and consequently devalue the US dollar.

We went from the tightest carry out in history to the largest crop in history. Corn was never going to stay at $7+ forever. Too much incentive to break pasture, and plant everything to corn to satiate the markets need for corn. Another big corn crop this next year will most likely further break the prices.

I don't necessarily agree that corn prices breaking has anything to do with devaluing the US dollar.

Thanks for the info Jake. I wondered why such a big swing. There are alot of factors that play into dollar value for sure, but if something of this magnitude could happen, I mean land values dropping significantly, I would think it could affect the dollar. Especially if lots of folks lose their shirt over it. Who knows??

 

[Red Barn Angus]

I think folks are getting overly excited about the corn price drop. They seem to be comparing it with last years price. If you go back a couple of years or more I think you will see that last years price was a fluke because of the vast area of drought. I know in my case I sold corn for over $8 a bushel but had little to sell. This year corn is half the price but I had a bumper crop and was better off this year. Corn is roughly $4.25 a bushel now and that is much more typical. Also the same farmers growing corn are also usually growing soybeans that are over $13 a bushel, down only a couple of dollars from 2012 when we had the drought. I don't see a good reason for panic so far. Land prices really only matter if you are buying or selling land or paying cash rent. Production is the main factor. Comparing today with the 80's isn't realistic as operating loans are 4% to 5% today compared with as high as 21% back then. I raise cattle as well and I think I would be a lot more concerned with $2,500 bred heifers. Buyers at that price are going to have to have some doggone good luck to even begin to be able to profit from that. I'm not anti farmer or anti rancher as I do some of both but I don't think any good can come from all this panic talk. Too often it is the media trying to sell their publications with big headlines and very little common sense reasoning. Land prices may well taper off from their huge increases in recent years but to say they will drop 30% or more is just people talking to get their names in the paper. There is almost always a demand for land and there is a lot of money out in the country from both farmers and ranchers. I don't know about other areas but in our country the city folks have just about been shut out and farmers and ranchers are buying the land that comes up for sale. I see that as a good thing. The overall agriculture balance sheet is as good as it has been in many years. Lots of folks are buying with cash. Just my two cents worth.

 

[tenbach79]

The whole world is different compared to the 80's. Our markets are more world driven than they where even 20 years ago. South America being a bigger player in the corn soybean production has change the world market for crops. Even Russia is a bigger player in the price of wheat. Land values will half to drop at some point. Even the big guys cant keep up with paying $8000 acre for ground and paying $200-300 for cash rent for ground. Just like Jake I am a young farmer/rancher that hopes some of these land prices go down. I tried just last year to buy some farm ground right across the road from some of mine that went for $1700. I paid $600 2 years prior to this ground selling, maybe I was stupid but I was offered $1200 acre for mine just 2 weeks after buying it. A old man that has 7 sons with a lot of money that has been buying ground up all over offered that to me. It really pissed me of because one of his grandkids is a really good friend of mine that he would have just given it to him to farm.

 

[scout]

I'm also a young guy willing to buy ground and hope it cheapenss up . I believe it will moderate . a collage professor of mine always said a commodity falls at the avg price of production and the guys that run above avg go broke and the guys below it make money. the same could happen right here in the cattle market

 

[burnt]

I'm also a young guy willing to buy ground and hope it cheapenss up . I believe it will moderate . a collage professor of mine always said a commodity falls at the avg price of production and the guys that run above avg go broke and the guys below it make money. the same could happen right here in the cattle market

Similar to what a speaker once said at a producer's meeting - "The average market price is equal to the average cost of production".

Seems logical, but he did not say how subsidies affect the equation. Likely just drops the average market price without changing the cost of production. So the one who knows how to work the subsidy system the bests wins?

 

[kbaum]

This will get people thinking. It doesn't make SD and ND look good.



http://www.ewg.org/research/going-going-gone

 

[Big Muddy rancher]

This will get people thinking. It doesn't make SD and ND look good.



http://www.ewg.org/research/going-going-gone

All the money invested in the CRP in the past . For what? Look at the towns that almost dried up and blew away because land was enrolled and farmers retired and moved away, Had their checks sent to Arizona. :?

 

[katrina]

Jigs and I told ya so....... Everyone planted corn around here and now it's $3.40 to $3.80ish.... Piled on the ground everywhere. Ethenol plant in Atkinson is full till the first of the year and has been for weeks..... We haven't seen the bottom yet if ya ask me... Wheat is still a good price don't think that will last forever...Lots of folks were going to cut a fat hog on corn and all I can say is welcome to farming...

 

[scout]

I'm also a young guy willing to buy ground and hope it cheapenss up . I believe it will moderate . a collage professor of mine always said a commodity falls at the avg price of production and the guys that run above avg go broke and the guys below it make money. the same could happen right here in the cattle market

Similar to what a speaker once said at a producer's meeting - "The average market price is equal to the average cost of production".

Seems logical, but he did not say how subsidies affect the equation. Likely just drops the average market price without changing the cost of production. So the one who knows how to work the subsidy system the bests wins?

I agree seems all the suabsidlies do is go to the land owner in higher rent around here.already see pasture rents going up around here do to higher cattle prices but have noticed some young guys jumping into the feeder market more money selling corn through beef than to the elevator .

 

[bverellen]

Scout;

Check your mail.