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State bank regulator worried over farm land values

Cal

Well-known member
http://news.yahoo.com/s/nm/20080304/bs_nm/usa_banks_farmland_dc&printer=1

State bank regulator worried over farm land values By John Poirier
Tue Mar 4, 1:26 PM ET


A state banking regulator raised a warning flag about soaring agricultural land values on Tuesday, telling a congressional hearing that the U.S. farm land bubble could burst and unleash a fresh set of economic problems.

"If there has been too much leveraged or loaned against the inflated value of farm land, the bubble will burst, and we will once again experience an economic crisis similar to that of the 1980s," Iowa Superintendent of Banking Thomas Gronstal told the Senate Banking Committee.

Gronstal, who represented the Conference of State Bank Supervisors, was one of several regulators who testified about the subprime mortgage and credit problems that banks are facing.

"My fellow state supervisors and I are closely watching the agricultural sector," he said.

Gronstal warned that the current agricultural conditions appear similar to the conditions seen in the 1970s that led to the economic and financial collapse of the 1980s.

"The dramatic increase of farm land value in the last few years makes the agricultural sector look strong," Gronstal said. "In the future, should the price of corn, soybeans and other commodities decrease, the price of farm land would most likely also fall."

The average value of U.S. crop land hit a record high of $2,700 per acre in 2007, compared with $1,340 per acre in 1998, according to U.S. Agriculture Department data. The value of crop land in some key Midwestern states was much higher, with Illinois averaging $4,460 per acre in 2007, the data showed.

Gronstal also said that smaller or community banks have felt the impact of the declining U.S. housing market due to the subprime mortgage crisis.

State banking regulators are preparing to handle a rising number of bank failures. "Based on current information and conditions, we do not expect widespread failures," Gronstal said.

The state banking regulators group launched a nationwide mortgage licensing system in January 2008 to fight mortgage fraud and unify state license procedures for mortgage lenders and brokers. Seven states have begun using the system, and another four to six states are expected to join the licensing system each quarter, Gronstal said.

The licensing system tracks state-licensed mortgage companies and individuals across state lines.

"Honest mortgage bankers and brokers will benefit from the removal of fraudulent and incompetent operators, and from having one central point of contact for submitting and updating license applications," Gronstal said.
 

Mike

Well-known member
The burst in farm real property values in the 80's was a direct result of Jimmy Carter's infamous grain embargo when crop values plummeted overnight.

I don't see a property bust any time soon unless the ethanol boom explodes and food goods worldwide become plentiful.

I would start drilling oil in the ANWAR yesterday. Just my $.02.
 

BRG

Well-known member
I don't see much of a land price bust either until the grain markets lets up some.

Their is plenty of Oil in the US thant needs to be drilled, but what good will it do if we can't put up any refinery's. Lots of Oil in ND being found. But what do we do with it. I say take all the money we are putting into Ethanol refinery's and make new OIL refinery's.
 

Red Barn Angus

Well-known member
Thomas Gronstal hasn't studied the farm land markets very closely with his comments about the present time being similar to the 80's. The only similarity is that land values have increased considerably. Commodity prices are extremely high today, they weren't then. Interest rates were extremely high then, they aren't now. There are lots more absentee owners now than then, more land is paid for now than then. No wonder the banking business is in trouble with people like him in control. That's not to say the land bubble cannot burst but a lot of other bubbles will have to pop first. JMHO
 

Sandhusker

Well-known member
Red Barn Angus said:
Thomas Gronstal hasn't studied the farm land markets very closely with his comments about the present time being similar to the 80's. The only similarity is that land values have increased considerably. Commodity prices are extremely high today, they weren't then. Interest rates were extremely high then, they aren't now. There are lots more absentee owners now than then, more land is paid for now than then. No wonder the banking business is in trouble with people like him in control. That's not to say the land bubble cannot burst but a lot of other bubbles will have to pop first. JMHO

If I remember correctly, Dr. Kohl's reasons was that there was going to be less and less support in Congress for ag subsidies, the stock market was bound to return to historic averages, hmmmmm, I think there were 4 reasons he had. Anyway, they were all detrimental to ag. real estate being an investment vehicle - which is one of the big pushers of higher land prices.
 

Mike

Well-known member
Someone thinks ag real estate is an investment vehicle. I have a close friend who owns a section in Iowa's seed corn growing area and was offered just above $10,000.00 per acre last week by what he thinks is a consortium for Monsanto. :roll:
 

Red Barn Angus

Well-known member
Well, Dr. Kohl is a sharp fellow. Does he still give those "high energy" presentations? Thought he was going to retire. Doubt he could ever completely retire....One of the few really intelligent ag speakers still around.

Wow, 10 grand an acre is quite a price but to Monsanto? Where is it all going to end? Will we all be a tenant to some big company?
 

Cal

Well-known member
Mike said:
The burst in farm real property values in the 80's was a direct result of Jimmy Carter's infamous grain embargo when crop values plummeted overnight.

I don't see a property bust any time soon unless the ethanol boom explodes and food goods worldwide become plentiful.

I would start drilling oil in the ANWAR yesterday. Just my $.02.
That's kind of what I thought, but there was a very similiar article in the latest Brock Report, so did a search and found that printable version. Something else that is in it that I'll have to type out:

Fertilizer Output Seen Ample

Fertilizer prices continued to surge during February with potash and phosphorus prices rising 18% from month earlier, mixed fertilizer prices up 5.1% and nitrogen prices up 3.4%, according to USDA. But new projections from the U.N. Food and Agriculture Organization offer hope for future price relief. According to an outlook released by the FAO in late February, growth in world fertilizer output will outpace rising demand from higher levels of food and biofuel production. In a five-year outlook, FAO estimated global supplies of nitrogen, phosphate and potash nutrient would increase by 34 million metric tons, or 3% annually. This is "comfortably sufficient" to cover fertilizer demand growth.

Also... Iran and countries east, such as Afghanistan, India, Pakistan, Turkmenistand, Uzbekistand and Kazakhstand, all major wheat producers are threated by Virulent Rust. :wink:
 

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