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n. Illinois | Sir:
You have nailed it. The land value issue is going to be the major one in the next decade with decreasing net cash returns along with increasing cost of capital. Land values can not be sustained at their current levels. Every Lender that services Ag has been using the land equity to bail out poor operational results for the last 20+ years and so far they have been okay because interest rates have been kept low. Just listen to an Farm Economist that works for Farmer Mac and he is convinced that long term rates are not coming back down anytime soon. In fact they shared that 85% of the deals Farmer Mac has done in 2023 have all been priced either variable or 5 year or less on the fixed rate term. for reference in 2022 the variable and short term fixed rates (5 years or less) rates accounted for 38% of their new deals. The keys going forward are going to be keep liquid and cull out unprofitable pieces of your business. | |
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agriculture is an industry of dynamic change......
