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cropsey, il 61731 | 1st off they must not have surveyed farmers because we are all pretty pessimistic. We still complained at $8 corn. The survey suggests land prices are going up in the face of a grain market that is not.
With the number of acres we have in production, we need huge demand just to keep carryover reasonable and huge demand doesn't occur unless prices are a perceived or relative bargain. I think we see that market right now. I'm guessing a place with a typical basis is going to see prices between 3.25 and 3.99 (can't hit $4 cash). Right now we have a balance between supply demand and demand for commodity paper by funds and it will cycle within a range. This latest weather market will bring us to the top of the range and once things back off or the weather doesn't happen at all, we will retreat to the bottom of the range. Too much corn with huge demand that is really only sufficient demand keeps us in a range. Until acres change significantly, I think this is the program.
That said, why would land or anything else related to farming go significantly up in price and why would anyone involved think that? As farmers, we may have some cash saved up for one last purchase and buy a little high. Investors might be suckered in expected big cash rents and that's going away (probably a year away from bankers cutting off the money). I fully understand land is not going to cash flow any year, but it has to have a little connection to the money that pays for it. Schnitkey at UofI says it's all about interest rates so what I just said about the farm economy doesn't matter. However, interest rates are going up so yet another reason land isn't going to be significantly higher any time soon.
Is this just all marketing? I'll be the first to admit that when land went from $3000 to $4500 back in 07 (maybe), I didn't see a price run up coming. Of course we tossed in ethanol and a drought which changed things a lot. These days those high prices brought so much more land into production that we need some unexpected martian demand to move prices very much. Make sense? | |
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Purdues farmer sentiment
