Monday, March 25, 2013

Signs of Danger in Farmland Prices?

As far back as 2011, when the run-up in land prices was still gathering momentum, the Federal Deposit Insurance Corporation held a symposium in Arlington, Va., for bankers, regulators and investors titled “Don’t Bet the Farm: Assessing the Boom in U.S. Farmland Prices.” But banks and others continued to offer farmers low-interest loans.
Debt held by the nation’s farmers has risen nearly 30 percent since 2007, to an expected $277.4 billion this year. The bulk of those loans were made by commercial banks, the farm credit system and the Farm Service Agency. Some regulators and critics say that figure is most likely undercounting debt from specialized finance institutions or credit extended by seed companies like Monsanto and equipment manufacturers like John Deere.
While national data does not show sharp jumps in closely watched debt gauges, some analysts point to other data that reveal farm debts have already topped levels reached just before the farm crisis of the ’80s. Data that the Kansas Farm Management Association has collected from more than 1,300 farms in the state showed the amount of debt compared to the value of underlying assets had climbed to 25.5 percent at the end of 2011, slightly above where it stood in 1979.
Some farmers are in over their heads already. One of the heartland’s most talked about bankruptcies in years is that of Stamp Farms, of Decatur, Mich. In less than a decade, Michael D. Stamp, 37, built his farm into a huge operation growing corn and soybeans. In November, he was hailed as a savvy farming entrepreneur on the cover of Top Producer, an agricultural magazine, and was one of three national finalists in its annual contest.
I still predict that when the shit hits the fan, all the talk of farmers buying land with cash will prove to be more banker bullshit.  Nobody is laying out $20,000 an acre cash for farm ground.  They have to be borrowing against land they already own.  Maybe I'm wrong, but all the claims of the realtors smell a lot like the the feedlot.

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